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 Southern National Banc. of Virginia, Inc (NASDAQ:SONA).
Southern National Banc. of Virginia, Inc (NASDAQ:SONA) was in 9 hedge funds’ portfolios at the end of the third quarter of 2019. SONA has experienced an increase in activity from the world’s largest hedge funds lately. There were 7 hedge funds in our database with SONA holdings at the end of the previous quarter. Our calculations also showed that SONA 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.
If you’d ask most traders, hedge funds are perceived as worthless, outdated investment vehicles of yesteryear. While there are more than 8000 funds with their doors open at the moment, We hone in on the top tier of this group, approximately 750 funds. It is estimated that this group of investors administer bulk of all hedge funds’ total asset base, and by tracking their inimitable picks, Insider Monkey has brought to light a number of investment strategies that have historically defeated the broader indices. Insider Monkey’s flagship short hedge fund strategy outstripped the S&P 500 short ETFs by around 20 percentage points per annum since its inception in May 2014. Our portfolio of short stocks lost 27.8% since February 2017 (through November 21st) even though the market was up more than 39% during the same period. We just shared a list of 7 short targets in our latest quarterly update .
Jim Simons of Renaissance Technologies
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. Let’s take a gander at the recent hedge fund action regarding Southern National Banc. of Virginia, Inc (NASDAQ:SONA).
How are hedge funds trading Southern National Banc. of Virginia, Inc (NASDAQ:SONA)?
At the end of the third quarter, a total of 9 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 29% from the previous quarter. By comparison, 7 hedge funds held shares or bullish call options in SONA a year ago. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Of the funds tracked by Insider Monkey, Renaissance Technologies has the biggest position in Southern National Banc. of Virginia, Inc (NASDAQ:SONA), worth close to $9.1 million, accounting for less than 0.1%% of its total 13F portfolio. Sitting at the No. 2 spot is Royce & Associates, led by Chuck Royce, holding a $5.8 million position; 0.1% of its 13F portfolio is allocated to the company. Some other professional money managers with similar optimism consist of Matthew Lindenbaum’s Basswood Capital, David Harding’s Winton Capital Management and Jeffrey Bronchick’s Cove Street Capital. In terms of the portfolio weights assigned to each position Basswood Capital allocated the biggest weight to Southern National Banc. of Virginia, Inc (NASDAQ:SONA), around 0.24% of its 13F portfolio. Cove Street Capital is also relatively very bullish on the stock, designating 0.11 percent of its 13F equity portfolio to SONA.
Consequently, some big names were leading the bulls’ herd. Winton Capital Management, managed by David Harding, established the most valuable position in Southern National Banc. of Virginia, Inc (NASDAQ:SONA). Winton Capital Management had $1.1 million invested in the company at the end of the quarter. Ken Griffin’s Citadel Investment Group also initiated a $0.3 million position during the quarter.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Southern National Banc. of Virginia, Inc (NASDAQ:SONA) but similarly valued. We will take a look at Diplomat Pharmacy Inc (NYSE:DPLO), Spark Energy, Inc. (NASDAQ:SPKE), Kimball Electronics Inc (NASDAQ:KE), and Golden Entertainment Inc (NASDAQ:GDEN). This group of stocks’ market valuations are similar to SONA’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| DPLO | 10 | 62382 | 2 |
| SPKE | 8 | 14186 | -3 |
| KE | 10 | 20155 | 1 |
| GDEN | 12 | 75579 | 1 |
| Average | 10 | 43076 | 0.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 10 hedge funds with bullish positions and the average amount invested in these stocks was $43 million. That figure was $21 million in SONA’s case. Golden Entertainment Inc (NASDAQ:GDEN) is the most popular stock in this table. On the other hand Spark Energy, Inc. (NASDAQ:SPKE) is the least popular one with only 8 bullish hedge fund positions. Southern National Banc. of Virginia, Inc (NASDAQ:SONA) 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 SONA wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); SONA investors were disappointed as the stock returned 4.1% 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.
