Is SAIC Stock A Buy or Sell?

While the market driven by short-term sentiment influenced by the accommodative interest rate environment in the US, virus news and stimulus spending, many smart money investors are starting to get cautious towards the current bull run since March and hedging or reducing many of their long positions. Some fund managers are betting on Dow hitting 40,000 to generate strong returns. However, as we know, big investors usually buy stocks with strong fundamentals that can deliver gains both in bull and bear markets, which is why we believe we can profit from imitating them. In this article, we are going to take a look at the smart money sentiment surrounding Science Applications International Corp (NYSE:SAIC).

Is SAIC stock a buy? The smart money was betting on the stock. The number of bullish hedge fund bets inched up by 7 recently. Science Applications International Corp (NYSE:SAIC) was in 28 hedge funds’ portfolios at the end of December. The all time high for this statistic is 35. Our calculations also showed that SAIC isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings). There were 21 hedge funds in our database with SAIC positions at the end of the third quarter.

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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 124 percentage points since March 2017 (see the details here).

Bernard Horn of Polaris Capital Management

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, auto parts business is a recession resistant business, so we are taking a closer look at this discount auto parts stock that is growing at a 196% annualized rate. We go through lists like the 15 best micro-cap stocks to buy now to identify the next stock with 10x upside potential. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. Keeping this in mind we’re going to check out the recent hedge fund action encompassing Science Applications International Corp (NYSE:SAIC).

Do Hedge Funds Think SAIC Is A Good Stock To Buy Now?

Heading into the first quarter of 2021, a total of 28 of the hedge funds tracked by Insider Monkey were long this stock, a change of 33% from the previous quarter. On the other hand, there were a total of 27 hedge funds with a bullish position in SAIC a year ago. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, Polaris Capital Management held the most valuable stake in Science Applications International Corp (NYSE:SAIC), which was worth $48.6 million at the end of the fourth quarter. On the second spot was Adage Capital Management which amassed $45.6 million worth of shares. Horizon Asset Management, Sunriver Management, and Balyasny Asset Management 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 Sunriver Management allocated the biggest weight to Science Applications International Corp (NYSE:SAIC), around 6.08% of its 13F portfolio. Washington Harbour Partners is also relatively very bullish on the stock, earmarking 3.14 percent of its 13F equity portfolio to SAIC.

As aggregate interest increased, key hedge funds have jumped into Science Applications International Corp (NYSE:SAIC) headfirst. Balyasny Asset Management, managed by Dmitry Balyasny, assembled the most valuable position in Science Applications International Corp (NYSE:SAIC). Balyasny Asset Management had $32 million invested in the company at the end of the quarter. Mina Faltas’s Washington Harbour Partners also initiated a $17.1 million position during the quarter. The other funds with brand new SAIC positions are Ken Griffin’s Citadel Investment Group, Israel Englander’s Millennium Management, and Qing Li’s Sciencast Management.

Let’s check out hedge fund activity in other stocks similar to Science Applications International Corp (NYSE:SAIC). We will take a look at Schrodinger, Inc. (NASDAQ:SDGR), Starwood Property Trust, Inc. (NYSE:STWD), People’s United Financial, Inc. (NASDAQ:PBCT), Cullen/Frost Bankers, Inc. (NYSE:CFR), Integra Lifesciences Holdings Corp (NASDAQ:IART), Eastgroup Properties Inc (NYSE:EGP), and Yamana Gold Inc. (NYSE:AUY). This group of stocks’ market caps resemble SAIC’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 18.4 hedge funds with bullish positions and the average amount invested in these stocks was $239 million. That figure was $293 million in SAIC’s case. People’s United Financial, Inc. (NASDAQ:PBCT) is the most popular stock in this table. On the other hand Starwood Property Trust, Inc. (NYSE:STWD) is the least popular one with only 13 bullish hedge fund positions. Science Applications International Corp (NYSE:SAIC) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for SAIC is 80.9. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. 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 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks gained 12.3% in 2021 through April 19th and beat the market again by 0.9 percentage points. Unfortunately SAIC wasn’t nearly as popular as these 30 stocks and hedge funds that were betting on SAIC were disappointed as the stock returned -5.7% since the end of December (through 4/19) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 30 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.

Disclosure: None. This article was originally published at Insider Monkey.

Follow Insider Monkey on Twitter