It was a rough fourth quarter for many hedge funds, which were naturally unable to overcome the big dip in the broad market, as the S&P 500 fell by about 7% during October and average hedge fund losing about 3%. The Russell 2000, composed of smaller companies, performed even worse, trailing the S&P by about 4 percentage points during the first half of Q4, as investors fled less-known quantities for safe havens. This was the case with hedge funds, who we heard were pulling money from the market amid the volatility, which included money from small-cap stocks, which they invest in at a higher rate than other investors. This action contributed to the greater decline in these stocks during the tumultuous period. We will study how this market volatility affected their sentiment towards Sogou Inc. (NYSE:SOGO) during the quarter below.
Sogou Inc. (NYSE:SOGO) was in 6 hedge funds’ portfolios at the end of September. SOGO has experienced a decrease in hedge fund interest of late. There were 9 hedge funds in our database with SOGO holdings at the end of the previous quarter. Our calculations also showed that SOGO isn’t among the 30 most popular stocks among hedge funds.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s flagship best performing hedge funds strategy returned 6.3% year to date (through December 3rd) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 18 percentage points since its inception (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
We’re going to take a look at the latest hedge fund action surrounding Sogou Inc. (NYSE:SOGO).
How have hedgies been trading Sogou Inc. (NYSE:SOGO)?
At Q3’s end, a total of 6 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -33% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards SOGO over the last 13 quarters. With hedgies’ capital changing hands, there exists a few noteworthy hedge fund managers who were adding to their stakes substantially (or already accumulated large positions).
More specifically, Citadel Investment Group was the largest shareholder of Sogou Inc. (NYSE:SOGO), with a stake worth $4.2 million reported as of the end of September. Trailing Citadel Investment Group was OZ Management, which amassed a stake valued at $2.7 million. Tiger Global Management LLC, Indus Capital, and Citadel Investment Group were also very fond of the stock, giving the stock large weights in their portfolios.
Since Sogou Inc. (NYSE:SOGO) has witnessed declining sentiment from the smart money, it’s safe to say that there is a sect of hedgies who sold off their positions entirely in the third quarter. It’s worth mentioning that Israel Englander’s Millennium Management dumped the biggest stake of all the hedgies monitored by Insider Monkey, valued at an estimated $5.9 million in stock. Peter Rathjens, Bruce Clarke and John Campbell’s fund, Arrowstreet Capital, also said goodbye to its stock, about $0.5 million worth. These transactions are important to note, as aggregate hedge fund interest was cut by 3 funds in the third quarter.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Sogou Inc. (NYSE:SOGO) but similarly valued. These stocks are Cedar Fair, L.P. (NYSE:FUN), Old National Bancorp (NASDAQ:ONB), Terex Corporation (NYSE:TEX), and Colliers International Group Inc (NASDAQ:CIGI). This group of stocks’ market caps are closest to SOGO’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| FUN | 7 | 20776 | -1 |
| ONB | 6 | 24643 | -2 |
| TEX | 21 | 474766 | 0 |
| CIGI | 11 | 274919 | 0 |
| Average | 11.25 | 198776 | -0.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 11.25 hedge funds with bullish positions and the average amount invested in these stocks was $199 million. That figure was $9 million in SOGO’s case. Terex Corporation (NYSE:TEX) is the most popular stock in this table. On the other hand Old National Bancorp (NYSE:ONB) is the least popular one with only 6 bullish hedge fund positions. Compared to these stocks Sogou Inc. (NYSE:SOGO) is even less popular than ONB. Considering that hedge funds aren’t fond of this stock in relation to other companies analyzed in this article, it may be a good idea to analyze it in detail and understand why the smart money isn’t behind this stock. This isn’t necessarily bad news. Although it is possible that hedge funds may think the stock is overpriced and view the stock as a short candidate, they may not be very familiar with the bullish thesis. In either case more research is warranted.
Disclosure: None. This article was originally published at Insider Monkey.