Hedge Funds Are Snapping Up Sequans Communications SA (SQNS)

Most investors tend to think that hedge funds and other asset managers are worthless, as they cannot beat even simple index fund portfolios. In fact, most people expect hedge funds to compete with and outperform the bull market that we have witnessed in recent years. However, hedge funds are generally partially hedged and aim at delivering attractive risk-adjusted returns rather than following the ups and downs of equity markets hoping that they will outperform the broader market. Our research shows that certain hedge funds do have great stock picking skills (and we can identify these hedge funds in advance pretty accurately), so let’s take a glance at the smart money sentiment towards Sequans Communications SA (NYSE:SQNS).

Sequans Communications SA (NYSE:SQNS) has seen an increase in support from the world’s most elite money managers recently. Sequans Communications SA (NYSE:SQNS) was in 10 hedge funds’ portfolios at the end of the second quarter of 2021. The all time high for this statistic is 9. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that SQNS isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).

In today’s marketplace there are a large number of gauges shareholders use to analyze their stock investments. Some of the most under-the-radar gauges are hedge fund and insider trading signals. Our researchers have shown that, historically, those who follow the best picks of the elite money managers can outpace the broader indices by a solid amount (see the details here). Also, our monthly newsletter’s portfolio of long stock picks returned 185.4% since March 2017 (through August 2021) and beat the S&P 500 Index by more than 79 percentage points. You can download a sample issue of this newsletter on our website .

Ken Griffin of Citadel Investment Group

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. Keeping this in mind we’re going to view the recent hedge fund action encompassing Sequans Communications SA (NYSE:SQNS).

Do Hedge Funds Think SQNS Is A Good Stock To Buy Now?

At the end of June, a total of 10 of the hedge funds tracked by Insider Monkey were long this stock, a change of 11% from the first quarter of 2020. The graph below displays the number of hedge funds with bullish position in SQNS over the last 24 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, Lynrock Lake was the largest shareholder of Sequans Communications SA (NYSE:SQNS), with a stake worth $21.2 million reported as of the end of June. Trailing Lynrock Lake was Divisar Capital, which amassed a stake valued at $9.3 million. North Run Capital, Masters Capital Management, and Roubaix Capital were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position North Run Capital allocated the biggest weight to Sequans Communications SA (NYSE:SQNS), around 6.18% of its 13F portfolio. Divisar Capital is also relatively very bullish on the stock, dishing out 3.09 percent of its 13F equity portfolio to SQNS.

As aggregate interest increased, key hedge funds have jumped into Sequans Communications SA (NYSE:SQNS) headfirst. North Run Capital, managed by Thomas Ellis and Todd Hammer, initiated the biggest position in Sequans Communications SA (NYSE:SQNS). North Run Capital had $9.1 million invested in the company at the end of the quarter. Ken Griffin’s Citadel Investment Group also made a $0.2 million investment in the stock during the quarter.

Let’s now take a look at hedge fund activity in other stocks similar to Sequans Communications SA (NYSE:SQNS). We will take a look at 1st Constitution Bancorp (NASDAQ:FCCY), LSI Industries, Inc. (NASDAQ:LYTS), LCNB Corp. (NASDAQ:LCNB), Gaia, Inc. (NASDAQ:GAIA), ConforMIS, Inc. (NASDAQ:CFMS), Grindrod Shipping Holdings Ltd. (NASDAQ:GRIN), and Lincoln Educational Services Corporation (NASDAQ:LINC). This group of stocks’ market valuations resemble SQNS’s market valuation.

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As you can see these stocks had an average of 9 hedge funds with bullish positions and the average amount invested in these stocks was $30 million. That figure was $54 million in SQNS’s case. Gaia, Inc. (NASDAQ:GAIA) is the most popular stock in this table. On the other hand Grindrod Shipping Holdings Ltd. (NASDAQ:GRIN) is the least popular one with only 2 bullish hedge fund positions. Sequans Communications SA (NYSE:SQNS) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for SQNS is 62.7. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 25.7% in 2021 through September 27th and beat the market again by 6.2 percentage points. Unfortunately SQNS wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on SQNS were disappointed as the stock returned -24.3% since the end of June (through 9/27) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.

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Disclosure: None. This article was originally published at Insider Monkey.