At Insider Monkey we track the activity of some of the best-performing hedge funds like Appaloosa Management, Baupost, and Tiger Global because we determined that some of the stocks that they are collectively bullish on can help us generate returns above the broader indices. Out of thousands of stocks that hedge funds invest in, small-caps can provide the best returns over the long term due to the fact that these companies are less efficiently priced and are usually under the radars of mass-media, analysts and dumb money. This is why we follow the smart money moves in the small-cap space.
Sierra Wireless, Inc. (NASDAQ:SWIR) was in 10 hedge funds’ portfolios at the end of December. SWIR investors should pay attention to an increase in enthusiasm from smart money of late. There were 8 hedge funds in our database with SWIR positions at the end of the previous quarter. Our calculations also showed that swir isn’t among the 30 most popular stocks among hedge funds.
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the market by 32 percentage points since May 2014 through March 12, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
We’re going to go over the recent hedge fund action encompassing Sierra Wireless, Inc. (NASDAQ:SWIR).
How are hedge funds trading Sierra Wireless, Inc. (NASDAQ:SWIR)?
Heading into the first quarter of 2019, a total of 10 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 25% from the second quarter of 2018. By comparison, 7 hedge funds held shares or bullish call options in SWIR a year ago. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Trigran Investments was the largest shareholder of Sierra Wireless, Inc. (NASDAQ:SWIR), with a stake worth $23.8 million reported as of the end of December. Trailing Trigran Investments was Millennium Management, which amassed a stake valued at $5 million. Renaissance Technologies, Arrowstreet Capital, and Roumell Asset Management were also very fond of the stock, giving the stock large weights in their portfolios.
As aggregate interest increased, specific money managers have jumped into Sierra Wireless, Inc. (NASDAQ:SWIR) headfirst. Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, assembled the most valuable position in Sierra Wireless, Inc. (NASDAQ:SWIR). Arrowstreet Capital had $2.6 million invested in the company at the end of the quarter. Arnaud Ajdler’s Engine Capital also made a $0.1 million investment in the stock during the quarter. The only other fund with a brand new SWIR position is Gavin Saitowitz and Cisco J. del Valle’s Springbok Capital.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Sierra Wireless, Inc. (NASDAQ:SWIR) but similarly valued. These stocks are CEVA, Inc. (NASDAQ:CEVA), Navios Maritime Containers L.P. (NASDAQ:NMCI), Griffon Corporation (NYSE:GFF), and Waterstone Financial, Inc. (NASDAQ:WSBF). This group of stocks’ market caps match SWIR’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CEVA | 10 | 23018 | 3 |
| NMCI | 4 | 16567 | 4 |
| GFF | 14 | 78189 | -1 |
| WSBF | 9 | 78878 | 0 |
| Average | 9.25 | 49163 | 1.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 9.25 hedge funds with bullish positions and the average amount invested in these stocks was $49 million. That figure was $38 million in SWIR’s case. Griffon Corporation (NYSE:GFF) is the most popular stock in this table. On the other hand Navios Maritime Containers L.P. (NASDAQ:NMCI) is the least popular one with only 4 bullish hedge fund positions. Sierra Wireless, Inc. (NASDAQ:SWIR) 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 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. Unfortunately SWIR wasn’t nearly as popular as these 15 stock and hedge funds that were betting on SWIR were disappointed as the stock returned -4.1% and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 15 most popular stocks) among hedge funds as 13 of these stocks already outperformed the market this year.
Disclosure: None. This article was originally published at Insider Monkey.
