We are still in an overall bull market and many stocks that smart money investors were piling into surged through the end of November. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 54% and 51% respectively. Hedge funds’ top 3 stock picks returned 41.7% this year and beat the S&P 500 ETFs by 14 percentage points. That’s a big deal.This is why following the smart money sentiment is a useful tool at identifying the next stock to invest in.
SI-BONE, Inc. (NASDAQ:SIBN) was in 7 hedge funds’ portfolios at the end of the third quarter of 2019. SIBN investors should be aware of a decrease in hedge fund sentiment in recent months. There were 9 hedge funds in our database with SIBN holdings at the end of the previous quarter. Our calculations also showed that SIBN isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 27.8% through November 21, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Samuel Isaly of OrbiMed Advisors
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds‘ buy/sell signals. We’re going to take a look at the latest hedge fund action encompassing SI-BONE, Inc. (NASDAQ:SIBN).
What does smart money think about SI-BONE, Inc. (NASDAQ:SIBN)?
At Q3’s end, a total of 7 of the hedge funds tracked by Insider Monkey were long this stock, a change of -22% from the second quarter of 2019. Below, you can check out the change in hedge fund sentiment towards SIBN over the last 17 quarters. With hedge funds’ positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were increasing their holdings meaningfully (or already accumulated large positions).
The largest stake in SI-BONE, Inc. (NASDAQ:SIBN) was held by Driehaus Capital, which reported holding $18.7 million worth of stock at the end of September. It was followed by OrbiMed Advisors with a $7.5 million position. Other investors bullish on the company included Nine Ten Partners, Broadfin Capital, and Millennium Management. In terms of the portfolio weights assigned to each position Nine Ten Partners allocated the biggest weight to SI-BONE, Inc. (NASDAQ:SIBN), around 1.46% of its 13F portfolio. Broadfin Capital is also relatively very bullish on the stock, setting aside 0.73 percent of its 13F equity portfolio to SIBN.
Because SI-BONE, Inc. (NASDAQ:SIBN) has experienced a decline in interest from the smart money, logic holds that there lies a certain “tier” of hedgies who sold off their entire stakes heading into Q4. At the top of the heap, Anand Parekh’s Alyeska Investment Group dumped the biggest stake of the 750 funds tracked by Insider Monkey, worth about $2 million in stock, and Vishal Saluja and Pham Quang’s Endurant Capital Management was right behind this move, as the fund said goodbye to about $1.3 million worth. These transactions are important to note, as aggregate hedge fund interest was cut by 2 funds heading into Q4.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as SI-BONE, Inc. (NASDAQ:SIBN) but similarly valued. We will take a look at Maverix Metals Inc. (NYSE:MMX), IES Holdings, Inc. (NASDAQ:IESC), Progenics Pharmaceuticals, Inc. (NASDAQ:PGNX), and Lydall, Inc. (NYSE:LDL). This group of stocks’ market caps resemble SIBN’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| MMX | 1 | 963 | 0 |
| IESC | 8 | 275175 | 3 |
| PGNX | 12 | 69681 | -1 |
| LDL | 13 | 23112 | 1 |
| Average | 8.5 | 92233 | 0.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 8.5 hedge funds with bullish positions and the average amount invested in these stocks was $92 million. That figure was $39 million in SIBN’s case. Lydall, Inc. (NYSE:LDL) is the most popular stock in this table. On the other hand Maverix Metals Inc. (NYSE:MMX) is the least popular one with only 1 bullish hedge fund positions. SI-BONE, Inc. (NASDAQ:SIBN) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately SIBN wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); SIBN investors were disappointed as the stock returned 0.7% during the first two months of the fourth quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as 70 percent of these stocks already outperformed the market in Q4.
Disclosure: None. This article was originally published at Insider Monkey.