Coronavirus is probably the #1 concern in investors’ minds right now. It should be. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW. We predicted that a US recession is imminent and US stocks will go down by at least 20% in the next 3-6 months. We also told you to short the market ETFs and buy long-term bonds. Investors who agreed with us and replicated these trades are up double digits whereas the market is down double digits. Our article also called for a total international travel ban to prevent the spread of the coronavirus especially from Europe. We were one step ahead of the markets and the president (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. We know that hedge funds generate strong, risk-adjusted returns over the long run, therefore imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, smart money investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do (like Peltz’s recent General Electric losses). However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, as the current round of 13F filings has just ended, let’s examine the smart money sentiment towards Sanmina Corporation (NASDAQ:SANM).
Sanmina Corporation (NASDAQ:SANM) has seen a decrease in support from the world’s most elite money managers lately. SANM was in 21 hedge funds’ portfolios at the end of December. There were 22 hedge funds in our database with SANM holdings at the end of the previous quarter. Our calculations also showed that SANM 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).
According to most shareholders, hedge funds are perceived as unimportant, old investment tools of years past. While there are over 8000 funds with their doors open today, Our experts look at the leaders of this group, about 850 funds. These money managers handle the majority of the hedge fund industry’s total asset base, and by tracking their top picks, Insider Monkey has spotted a number of investment strategies that have historically beaten Mr. Market. Insider Monkey’s flagship short hedge fund strategy outstripped the S&P 500 short ETFs by around 20 percentage points annually since its inception in March 2017. Our portfolio of short stocks lost 35.3% since February 2017 (through March 3rd) even though the market was up more than 35% during the same period. We just shared a list of 7 short targets in our latest quarterly update .
Ric Dillon of Diamond Hill Capital
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. Keeping this in mind let’s take a look at the recent hedge fund action surrounding Sanmina Corporation (NASDAQ:SANM).
How have hedgies been trading Sanmina Corporation (NASDAQ:SANM)?
At the end of the fourth quarter, a total of 21 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -5% from one quarter earlier. By comparison, 15 hedge funds held shares or bullish call options in SANM a year ago. With the smart money’s positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were increasing their stakes meaningfully (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, Ric Dillon’s Diamond Hill Capital has the largest position in Sanmina Corporation (NASDAQ:SANM), worth close to $73.1 million, accounting for 0.4% of its total 13F portfolio. The second largest stake is held by Renaissance Technologies, which holds a $35.7 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Other members of the smart money with similar optimism encompass Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, D. E. Shaw’s D E Shaw and Chuck Royce’s Royce & Associates. In terms of the portfolio weights assigned to each position Invenomic Capital Management allocated the biggest weight to Sanmina Corporation (NASDAQ:SANM), around 1.54% of its 13F portfolio. Diamond Hill Capital is also relatively very bullish on the stock, designating 0.37 percent of its 13F equity portfolio to SANM.
Due to the fact that Sanmina Corporation (NASDAQ:SANM) has faced declining sentiment from hedge fund managers, it’s easy to see that there were a few hedgies that decided to sell off their positions entirely last quarter. Interestingly, Michael Gelband’s ExodusPoint Capital dropped the largest stake of the 750 funds tracked by Insider Monkey, totaling about $0.7 million in stock. Matthew Hulsizer’s fund, PEAK6 Capital Management, also said goodbye to its stock, about $0.4 million worth. These transactions are important to note, as total hedge fund interest fell by 1 funds last quarter.
Let’s check out hedge fund activity in other stocks similar to Sanmina Corporation (NASDAQ:SANM). These stocks are Noble Midstream Partners LP (NYSE:NBLX), Fabrinet (NYSE:FN), Steelcase Inc. (NYSE:SCS), and Kontoor Brands, Inc. (NASDAQ:KTB). This group of stocks’ market caps resemble SANM’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| NBLX | 5 | 7417 | 1 |
| FN | 25 | 223783 | 3 |
| SCS | 30 | 163843 | 6 |
| KTB | 14 | 102169 | -7 |
| Average | 18.5 | 124303 | 0.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 18.5 hedge funds with bullish positions and the average amount invested in these stocks was $124 million. That figure was $234 million in SANM’s case. Steelcase Inc. (NYSE:SCS) 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. Sanmina Corporation (NASDAQ:SANM) 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 SANM wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on SANM were disappointed as the stock returned -26.2% 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.
