Before we spend countless hours researching a company, we’d like to analyze what insiders, hedge funds and billionaire investors think of the stock first. We would like to do so because our research has shown that the elite investors’ consensus returns have been exceptional. In the following paragraphs, we find out what the billionaire investors and hedge funds think of SMART Global Holdings, Inc. (NASDAQ:SGH).
SMART Global Holdings, Inc. (NASDAQ:SGH) has experienced an increase in enthusiasm from smart money of late. SGH was in 14 hedge funds’ portfolios at the end of December. There were 12 hedge funds in our database with SGH positions at the end of the previous quarter. Our calculations also showed that SGH isn’t among the 30 most popular stocks among hedge funds.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in our short portfolio.
We’re going to take a look at the fresh hedge fund action surrounding SMART Global Holdings, Inc. (NASDAQ:SGH).
How are hedge funds trading SMART Global Holdings, Inc. (NASDAQ:SGH)?
Heading into the first quarter of 2019, a total of 14 of the hedge funds tracked by Insider Monkey were long this stock, a change of 17% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in SGH over the last 14 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Silver Lake Partners held the most valuable stake in SMART Global Holdings, Inc. (NASDAQ:SGH), which was worth $274.9 million at the end of the fourth quarter. On the second spot was Park West Asset Management which amassed $59.4 million worth of shares. Moreover, Driehaus Capital, Marshall Wace LLP, and Renaissance Technologies were also bullish on SMART Global Holdings, Inc. (NASDAQ:SGH), allocating a large percentage of their portfolios to this stock.
As aggregate interest increased, some big names were leading the bulls’ herd. Park West Asset Management, managed by Peter S. Park, created the biggest position in SMART Global Holdings, Inc. (NASDAQ:SGH). Park West Asset Management had $59.4 million invested in the company at the end of the quarter. Richard Driehaus’s Driehaus Capital also initiated a $10.9 million position during the quarter. The other funds with new positions in the stock are Jim Simons’s Renaissance Technologies, Ken Heebner’s Capital Growth Management, and Steve Cohen’s Point72 Asset Management.
Let’s now take a look at hedge fund activity in other stocks similar to SMART Global Holdings, Inc. (NASDAQ:SGH). We will take a look at Apollo Medical Holdings, Inc. (NASDAQ:AMEH), Seacor Holdings, Inc. (NYSE:CKH), Banc of California, Inc. (NYSE:BANC), and Select Energy Services, Inc. (NYSE:WTTR). All of these stocks’ market caps resemble SGH’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| AMEH | 3 | 2024 | -1 |
| CKH | 16 | 113538 | -3 |
| BANC | 17 | 92607 | 2 |
| WTTR | 12 | 57230 | -2 |
| Average | 12 | 66350 | -1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 12 hedge funds with bullish positions and the average amount invested in these stocks was $66 million. That figure was $374 million in SGH’s case. Banc of California, Inc. (NYSE:BANC) is the most popular stock in this table. On the other hand Apollo Medical Holdings, Inc. (NASDAQ:AMEH) is the least popular one with only 3 bullish hedge fund positions. SMART Global Holdings, Inc. (NASDAQ:SGH) 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 SGH wasn’t nearly as popular as these 15 stock and hedge funds that were betting on SGH were disappointed as the stock returned -24.8% 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.
