The third-quarter stock market correction has turned out to resemble the situation observed during the Asian financial crisis of 1997. The two relatively short-lived corrections occurred at a time with stable interest rates, falling commodity markets, with strong-performing technology and healthcare sectors, and struggling energy sector. Similarly, the two corrections followed long periods without a correction, which had to come sooner or later and it did. Even so, several prominent hedge fund investors publicly asserted their bearish view on the current state of the U.S. equity markets, suggesting that they significantly cut their exposure to equities during the latest quarter. Having said that, it would be worthwhile to take a look at the hedge fund sentiment on Sequential Brands Group Inc (NASDAQ:SQBG) in order to identify whether reputable and successful top money managers continue to believe in its potential.
Sequential Brands Group Inc (NASDAQ:SQBG) was in 10 hedge funds’ portfolios at the end of September. SQBG has experienced an increase in enthusiasm from smart money of late. There were 7 hedge funds in our database with SQBG holdings at the end of the previous quarter. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as CONE Midstream Partners LP (NYSE:CNNX), Flushing Financial Corporation (NASDAQ:FFIC), and M/I Homes Inc (NYSE:MHO) to gather more data points.
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To the average investor there are numerous signals shareholders can use to value stocks. Some of the most useful signals are hedge fund and insider trading activity. We have shown that, historically, those who follow the top picks of the elite fund managers can outperform the broader indices by a superb amount (see the details here).
Keeping this in mind, let’s take a look at the recent action encompassing Sequential Brands Group Inc (NASDAQ:SQBG).
How are hedge funds trading Sequential Brands Group Inc (NASDAQ:SQBG)?
At the end of the third quarter, a total of 10 of the hedge funds tracked by Insider Monkey were long this stock, a change of 43% from the previous quarter. With the smart money’s positions undergoing their usual ebb and flow, there exists an “upper tier” of key hedge fund managers who were upping their stakes meaningfully (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Buckingham Capital Management, managed by David Keidan, holds the largest position in Sequential Brands Group Inc (NASDAQ:SQBG). Buckingham Capital Management has a $21.9 million position in the stock, comprising 2% of its 13F portfolio. The second largest stake is held by Driehaus Capital, led by Richard Driehaus, holding a $5.4 million position; 0.2% of its 13F portfolio is allocated to the company. Some other hedge funds and institutional investors that are bullish encompass Jonathan Salinas’ Plymouth Lane Capital Management, Ari Zweiman’s 683 Capital Partners and Josh Goldberg’s G2 Investment Partners Management.
As aggregate interest increased, some big names have been driving this bullishness. Buckingham Capital Management established the most outsized position in Sequential Brands Group Inc (NASDAQ:SQBG). D. E. Shaw’s D E Shaw also initiated a $0.6 million position during the quarter. The following funds were also among the new SQBG investors: Israel Englander’s Millennium Management, Jim Simons’s Renaissance Technologies, and Paul Tudor Jones’ Tudor Investment Corp.
Let’s check out hedge fund activity in other stocks similar to Sequential Brands Group Inc (NASDAQ:SQBG). These stocks are CONE Midstream Partners LP (NYSE:CNNX), Flushing Financial Corporation (NASDAQ:FFIC), M/I Homes Inc (NYSE:MHO), and Blueprint Medicines Corp (NASDAQ:BPMC). This group of stocks’ market valuations are closest to SQBG’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CNNX | 4 | 24553 | 1 |
| FFIC | 8 | 32491 | 1 |
| MHO | 16 | 61104 | 7 |
| BPMC | 14 | 153250 | 0 |
As you can see these stocks had an average of 11 hedge funds with bullish positions and the average amount invested in these stocks was $68 million. That figure was $40 million in SQBG’s case. M/I Homes Inc (NYSE:MHO) is the most popular stock in this table, while CONE Midstream Partners LP (NYSE:CNNX) is the least popular one with only 4 bullish hedge fund positions. Sequential Brands Group Inc (NASDAQ:SQBG) is not the least popular stock in this group, but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard MHO might be a better candidate to consider a long position.