The Insider Monkey team has completed processing the quarterly 13F filings for the September quarter submitted by the hedge funds and other money managers included in our extensive database. Most hedge fund investors experienced strong gains on the back of a strong market performance, which certainly propelled them to adjust their equity holdings so as to maintain the desired risk profile. As a result, the relevancy of these public filings and their content is indisputable, as they may reveal numerous high-potential stocks. The following article will discuss the smart money sentiment towards Sutter Rock Capital Corp. (NASDAQ:SSSS).
Sutter Rock Capital Corp. (NASDAQ:SSSS) shareholders have witnessed an increase in hedge fund sentiment lately. SSSS was in 8 hedge funds’ portfolios at the end of the third quarter of 2019. There were 6 hedge funds in our database with SSSS positions at the end of the previous quarter. Our calculations also showed that SSSS 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.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
Israel Englander of Millennium Management
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 review the key hedge fund action encompassing Sutter Rock Capital Corp. (NASDAQ:SSSS).
Hedge fund activity in Sutter Rock Capital Corp. (NASDAQ:SSSS)
Heading into the fourth quarter of 2019, a total of 8 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 33% from the previous quarter. The graph below displays the number of hedge funds with bullish position in SSSS over the last 17 quarters. With the smart money’s positions undergoing their usual ebb and flow, there exists a few notable hedge fund managers who were adding to their stakes considerably (or already accumulated large positions).
More specifically, Intrinsic Edge Capital was the largest shareholder of Sutter Rock Capital Corp. (NASDAQ:SSSS), with a stake worth $1.9 million reported as of the end of September. Trailing Intrinsic Edge Capital was Millennium Management, which amassed a stake valued at $1.2 million. MD Sass, Arrowstreet Capital, and Beach Point Capital Management 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 Beach Point Capital Management allocated the biggest weight to Sutter Rock Capital Corp. (NASDAQ:SSSS), around 0.37% of its 13F portfolio. MD Sass is also relatively very bullish on the stock, designating 0.25 percent of its 13F equity portfolio to SSSS.
As industrywide interest jumped, specific money managers have been driving this bullishness. Beach Point Capital Management, managed by Carl Goldsmith and Scott Klein, assembled the most valuable position in Sutter Rock Capital Corp. (NASDAQ:SSSS). Beach Point Capital Management had $1 million invested in the company at the end of the quarter. Gregory Fraser, Rudolph Kluiber, and Timothy Krochuk’s GRT Capital Partners also initiated a $0.1 million position during the quarter.
Let’s go over hedge fund activity in other stocks similar to Sutter Rock Capital Corp. (NASDAQ:SSSS). We will take a look at TESSCO Technologies, Inc. (NASDAQ:TESS), PRGX Global Inc (NASDAQ:PRGX), StealthGas Inc. (NASDAQ:GASS), and GigOptix Inc (NYSE:GIG). This group of stocks’ market valuations are similar to SSSS’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| TESS | 2 | 7032 | -2 |
| PRGX | 7 | 37549 | 0 |
| GASS | 5 | 45969 | -1 |
| GIG | 5 | 21479 | -1 |
| Average | 4.75 | 28007 | -1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 4.75 hedge funds with bullish positions and the average amount invested in these stocks was $28 million. That figure was $6 million in SSSS’s case. PRGX Global Inc (NASDAQ:PRGX) is the most popular stock in this table. On the other hand TESSCO Technologies, Inc. (NASDAQ:TESS) is the least popular one with only 2 bullish hedge fund positions. Compared to these stocks Sutter Rock Capital Corp. (NASDAQ:SSSS) is more popular among hedge funds. 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. Hedge funds were also right about betting on SSSS as the stock returned 12.4% during the first two months of Q4 and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.
Disclosure: None. This article was originally published at Insider Monkey.