Hedge Funds Keep Buying Sonos, Inc. (SONO)

The latest 13F reporting period has come and gone, and Insider Monkey have plowed through 823 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of June 30th, when the S&P 500 Index was trading around the 3100 level. Since the end of March, investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned more than 50% since its bottom. In this article you are going to find out whether hedge funds thought Sonos, Inc. (NASDAQ:SONO) was a good investment heading into the third quarter and how the stock traded in comparison to the top hedge fund picks.

Is Sonos, Inc. (NASDAQ:SONO) ready to rally soon? Prominent investors were becoming hopeful. The number of long hedge fund positions went up by 2 recently. Sonos, Inc. (NASDAQ:SONO) was in 35 hedge funds’ portfolios at the end of June. The all time high for this statistics is 33. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that SONO isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings and see the video for a quick look at the top 5 stocks).

Video: Watch our video about the top 5 most popular hedge fund stocks.

In the 21st century investor’s toolkit there are several methods market participants use to appraise their holdings. Some of the best methods are hedge fund and insider trading signals. We have shown that, historically, those who follow the top picks of the top money managers can outperform the market by a significant amount (see the details here).

David Brown of Hawk Ridge Management

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost precious metals prices. So, we are checking out this junior gold mining stock. Legal marijuana is one of the fastest growing industries right now, so we are also checking out stock pitches like “the Starbucks of cannabis” to identify the next tenbagger. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. With all of this in mind let’s take a gander at the recent hedge fund action surrounding Sonos, Inc. (NASDAQ:SONO).

What have hedge funds been doing with Sonos, Inc. (NASDAQ:SONO)?

At the end of June, a total of 35 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 6% from the previous quarter. On the other hand, there were a total of 21 hedge funds with a bullish position in SONO a year ago. With hedgies’ capital changing hands, there exists a select group of notable hedge fund managers who were adding to their stakes meaningfully (or already accumulated large positions).

Among these funds, Point72 Asset Management held the most valuable stake in Sonos, Inc. (NASDAQ:SONO), which was worth $49.1 million at the end of the third quarter. On the second spot was Trigran Investments which amassed $42.7 million worth of shares. Hawk Ridge Management, Renaissance Technologies, and D E Shaw 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 Greenspring Associates allocated the biggest weight to Sonos, Inc. (NASDAQ:SONO), around 15.87% of its 13F portfolio. Corriente Advisors is also relatively very bullish on the stock, earmarking 14.88 percent of its 13F equity portfolio to SONO.

Now, key hedge funds were leading the bulls’ herd. Point72 Asset Management, managed by Steve Cohen, assembled the most valuable position in Sonos, Inc. (NASDAQ:SONO). Point72 Asset Management had $49.1 million invested in the company at the end of the quarter. Mark Hart III’s Corriente Advisors also made a $23 million investment in the stock during the quarter. The other funds with brand new SONO positions are Gavin Baker’s Atreides Management, Kamyar Khajavi’s MIK Capital, and George McCabe’s Portolan Capital Management.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Sonos, Inc. (NASDAQ:SONO) but similarly valued. We will take a look at Mersana Therapeutics, Inc. (NASDAQ:MRSN), Walker & Dunlop Inc. (NYSE:WD), Intercept Pharmaceuticals Inc (NASDAQ:ICPT), Spirit Airlines Incorporated (NYSE:SAVE), MakeMyTrip Limited (NASDAQ:MMYT), United Community Banks Inc (NASDAQ:UCBI), and Ambarella Inc (NASDAQ:AMBA). This group of stocks’ market caps are similar to SONO’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 20.3 hedge funds with bullish positions and the average amount invested in these stocks was $171 million. That figure was $328 million in SONO’s case. Ambarella Inc (NASDAQ:AMBA) is the most popular stock in this table. On the other hand MakeMyTrip Limited (NASDAQ:MMYT) is the least popular one with only 10 bullish hedge fund positions. Compared to these stocks Sonos, Inc. (NASDAQ:SONO) is more popular among hedge funds. Our overall hedge fund sentiment score for SONO is 87. 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. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 33% in 2020 through the end of August and still beat the market by 23.2 percentage points. Unfortunately SONO wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on SONO were disappointed as the stock returned -3.8% since the end of the second 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 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.

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