We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (see why hell is coming).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. Keeping this in mind, let’s take a look at whether SVMK Inc. (NASDAQ:SVMK) is a good investment right now. We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, unconventional data sources, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.
SVMK Inc. (NASDAQ:SVMK) has experienced an increase in enthusiasm from smart money of late. SVMK was in 31 hedge funds’ portfolios at the end of the fourth quarter of 2019. There were 26 hedge funds in our database with SVMK holdings at the end of the previous quarter. Our calculations also showed that SVMK isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by more than 41 percentage points since March 2017 (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 35.3% through March 3rd. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind we’re going to take a gander at the recent hedge fund action regarding SVMK Inc. (NASDAQ:SVMK).
What have hedge funds been doing with SVMK Inc. (NASDAQ:SVMK)?
At the end of the fourth quarter, a total of 31 of the hedge funds tracked by Insider Monkey were long this stock, a change of 19% from one quarter earlier. By comparison, 11 hedge funds held shares or bullish call options in SVMK a year ago. With hedge funds’ positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were upping their stakes significantly (or already accumulated large positions).
More specifically, Park West Asset Management was the largest shareholder of SVMK Inc. (NASDAQ:SVMK), with a stake worth $49 million reported as of the end of September. Trailing Park West Asset Management was Tiger Global Management LLC, which amassed a stake valued at $41.1 million. Legion Partners Asset Management, ThornTree Capital Partners, and Alyeska 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 Legion Partners Asset Management allocated the biggest weight to SVMK Inc. (NASDAQ:SVMK), around 9.98% of its 13F portfolio. Akaris Global Partners is also relatively very bullish on the stock, designating 9.28 percent of its 13F equity portfolio to SVMK.
As industrywide interest jumped, some big names have been driving this bullishness. Akaris Global Partners, managed by Asad Rahman and Aman Kapadia, initiated the biggest position in SVMK Inc. (NASDAQ:SVMK). Akaris Global Partners had $14.8 million invested in the company at the end of the quarter. Dmitry Balyasny’s Balyasny Asset Management also made a $12.7 million investment in the stock during the quarter. The following funds were also among the new SVMK investors: Greg Poole’s Echo Street Capital Management, Lee Ainslie’s Maverick Capital, and Josh Goldberg’s G2 Investment Partners Management.
Let’s now review hedge fund activity in other stocks similar to SVMK Inc. (NASDAQ:SVMK). These stocks are ArQule, Inc. (NASDAQ:ARQL), ESCO Technologies Inc. (NYSE:ESE), Sanmina Corporation (NASDAQ:SANM), and Noble Midstream Partners LP (NYSE:NBLX). All of these stocks’ market caps match SVMK’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| ARQL | 46 | 966954 | 22 |
| ESE | 9 | 42972 | 1 |
| SANM | 21 | 234374 | -1 |
| NBLX | 5 | 7417 | 1 |
| Average | 20.25 | 312929 | 5.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 20.25 hedge funds with bullish positions and the average amount invested in these stocks was $313 million. That figure was $302 million in SVMK’s case. ArQule, Inc. (NASDAQ:ARQL) is the most popular stock in this table. On the other hand Noble Midstream Partners LP (NYSE:NBLX) is the least popular one with only 5 bullish hedge fund positions. SVMK Inc. (NASDAQ:SVMK) is not the most popular stock in this group but hedge fund interest is still above average. 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 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 17.4% in 2020 through March 25th but beat the market by 5.5 percentage points. Unfortunately SVMK wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on SVMK were disappointed as the stock returned -28.6% during the same time period 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 many of these stocks already outperformed the market so far this year.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
