We are still in an overall bull market and many stocks that smart money investors were piling into surged in 2019. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained more than 57% each. Hedge funds’ top 3 stock picks returned 45.7% last year and beat the S&P 500 ETFs by 14.5 percentage points. That’s a big deal. This is why following the smart money sentiment is a useful tool at identifying the next stock to invest in.
Is SLM Corp (NASDAQ:SLM) a buy here? Money managers are reducing their bets on the stock. The number of long hedge fund positions retreated by 7 lately. Our calculations also showed that SLM isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video at the end of this article for Q2 rankings).
If you’d ask most investors, hedge funds are viewed as unimportant, old investment vehicles of yesteryear. While there are more than 8000 funds in operation at present, We look at the aristocrats of this group, approximately 750 funds. It is estimated that this group of investors oversee bulk of all hedge funds’ total capital, and by shadowing their best equity investments, Insider Monkey has come up with many investment strategies that have historically beaten Mr. Market. Insider Monkey’s flagship short hedge fund strategy outrun the S&P 500 short ETFs by around 20 percentage points annually since its inception in May 2014. Our portfolio of short stocks lost 27.8% since February 2017 (through November 21st) even though the market was up more than 39% during the same period. We just shared a list of 7 short targets in our latest quarterly update .
Jeffrey Ubben of ValueAct Capital
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager’s investor letter and the stock is still extremely cheap despite already gaining 20 percent. With all of this in mind we’re going to take a look at the key hedge fund action regarding SLM Corp (NASDAQ:SLM).
What does smart money think about SLM Corp (NASDAQ:SLM)?
Heading into the fourth quarter of 2019, a total of 25 of the hedge funds tracked by Insider Monkey were long this stock, a change of -22% from the second quarter of 2019. Below, you can check out the change in hedge fund sentiment towards SLM over the last 17 quarters. With hedge funds’ sentiment swirling, there exists a select group of noteworthy hedge fund managers who were increasing their holdings considerably (or already accumulated large positions).
Among these funds, ValueAct Capital held the most valuable stake in SLM Corp (NASDAQ:SLM), which was worth $345.8 million at the end of the third quarter. On the second spot was Point72 Asset Management which amassed $28.9 million worth of shares. Arrowstreet Capital, Renaissance Technologies, and Citadel Investment Group were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position ValueAct Capital allocated the biggest weight to SLM Corp (NASDAQ:SLM), around 3.73% of its 13F portfolio. Selz Capital is also relatively very bullish on the stock, setting aside 1.68 percent of its 13F equity portfolio to SLM.
Since SLM Corp (NASDAQ:SLM) has experienced bearish sentiment from the smart money, it’s safe to say that there were a few funds who were dropping their positions entirely last quarter. It’s worth mentioning that Kenneth Squire’s 13D Management cut the biggest investment of the “upper crust” of funds watched by Insider Monkey, valued at an estimated $14 million in stock. Dmitry Balyasny’s fund, Balyasny Asset Management, also said goodbye to its stock, about $5.6 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest fell by 7 funds last quarter.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as SLM Corp (NASDAQ:SLM) but similarly valued. We will take a look at Antero Midstream Corp (NYSE:AM), F.N.B. Corp (NYSE:FNB), Weingarten Realty Investors (NYSE:WRI), and Stag Industrial Inc (NYSE:STAG). This group of stocks’ market valuations resemble SLM’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| AM | 16 | 138560 | 1 |
| FNB | 18 | 107990 | -1 |
| WRI | 19 | 170653 | -1 |
| STAG | 20 | 217915 | 9 |
| Average | 18.25 | 158780 | 2 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 18.25 hedge funds with bullish positions and the average amount invested in these stocks was $159 million. That figure was $501 million in SLM’s case. Stag Industrial Inc (NYSE:STAG) is the most popular stock in this table. On the other hand Antero Midstream Corp (NYSE:AM) is the least popular one with only 16 bullish hedge fund positions. Compared to these stocks SLM Corp (NASDAQ:SLM) is more popular among hedge funds. 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. Unfortunately SLM wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on SLM were disappointed as the stock returned 8.6% in 2019 and trailed 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 65 percent of these stocks outperformed the market in 2019.
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.
