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 Sunworks, Inc. (NASDAQ:SUNW).
Sunworks, Inc. (NASDAQ:SUNW) investors should pay attention to an increase in support from the world’s most elite money managers recently. Sunworks, Inc. (NASDAQ:SUNW) was in 6 hedge funds’ portfolios at the end of March. The all time high for this statistic was previously 4. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. There were 4 hedge funds in our database with SUNW positions at the end of the fourth quarter. Our calculations also showed that SUNW isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).
To most stock holders, hedge funds are seen as underperforming, old investment vehicles of yesteryear. While there are greater than 8000 funds with their doors open at present, Our researchers choose to focus on the crème de la crème of this club, around 850 funds. These investment experts preside over the lion’s share of all hedge funds’ total capital, and by observing their inimitable equity investments, Insider Monkey has revealed a number of investment strategies that have historically outrun the market. Insider Monkey’s flagship short hedge fund strategy beat the S&P 500 short ETFs by around 20 percentage points a year since its inception in March 2017. Also, our monthly newsletter’s portfolio of long stock picks returned 206.8% since March 2017 (through May 2021) and beat the S&P 500 Index by more than 115 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, an activist hedge fund owns nearly 40% of this $24 biotech stock and is trying to buy the rest for around $50. So, we recommended a long position to our monthly premium newsletter subscribers. We go through lists like the 10 best battery 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 let’s view the key hedge fund action encompassing Sunworks, Inc. (NASDAQ:SUNW).
Do Hedge Funds Think SUNW Is A Good Stock To Buy Now?
Heading into the second quarter of 2021, a total of 6 of the hedge funds tracked by Insider Monkey were long this stock, a change of 50% from the previous quarter. By comparison, 1 hedge funds held shares or bullish call options in SUNW a year ago. With the smart money’s positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were increasing their holdings meaningfully (or already accumulated large positions).
More specifically, Renaissance Technologies was the largest shareholder of Sunworks, Inc. (NASDAQ:SUNW), with a stake worth $7.3 million reported as of the end of March. Trailing Renaissance Technologies was Citadel Investment Group, which amassed a stake valued at $3.9 million. OZ Management, Millennium Management, and Citadel Investment Group 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 OZ Management allocated the biggest weight to Sunworks, Inc. (NASDAQ:SUNW), around 0.02% of its 13F portfolio. Renaissance Technologies is also relatively very bullish on the stock, designating 0.01 percent of its 13F equity portfolio to SUNW.
As aggregate interest increased, key hedge funds have been driving this bullishness. OZ Management, managed by Daniel S. Och, initiated the most outsized position in Sunworks, Inc. (NASDAQ:SUNW). OZ Management had $2.5 million invested in the company at the end of the quarter. Israel Englander’s Millennium Management also made a $2.4 million investment in the stock during the quarter. The other funds with new positions in the stock are Ben Levine, Andrew Manuel and Stefan Renold’s LMR Partners and Daniel S. Och’s OZ Management.
Let’s now take a look at hedge fund activity in other stocks similar to Sunworks, Inc. (NASDAQ:SUNW). We will take a look at Franklin Covey Co. (NYSE:FC), West Bancorporation, Inc. (NASDAQ:WTBA), Alto Ingredients, Inc. (NASDAQ:ALTO), Viemed Healthcare, Inc. (NASDAQ:VMD), Chico’s FAS, Inc. (NYSE:CHS), RBB Bancorp (NASDAQ:RBB), and Natural Grocers by Vitamin Cottage Inc (NYSE:NGVC). This group of stocks’ market values are similar to SUNW’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| FC | 10 | 16462 | 1 |
| WTBA | 1 | 7397 | -2 |
| ALTO | 15 | 34218 | 2 |
| VMD | 10 | 30536 | -2 |
| CHS | 15 | 85239 | 4 |
| RBB | 7 | 13213 | 0 |
| NGVC | 8 | 28714 | -2 |
| Average | 9.4 | 30826 | 0.1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 9.4 hedge funds with bullish positions and the average amount invested in these stocks was $31 million. That figure was $13 million in SUNW’s case. Alto Ingredients, Inc. (NASDAQ:ALTO) is the most popular stock in this table. On the other hand West Bancorporation, Inc. (NASDAQ:WTBA) is the least popular one with only 1 bullish hedge fund positions. Sunworks, Inc. (NASDAQ:SUNW) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for SUNW is 54.9. 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 negative signal and 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 19.3% in 2021 through June 25th and surpassed the market again by 4.8 percentage points. Unfortunately SUNW wasn’t nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); SUNW investors were disappointed as the stock returned -25.3% since the end of March (through 6/25) 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 most of these stocks already outperformed the market in 2021.
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Disclosure: None. This article was originally published at Insider Monkey.
