We know that hedge funds generate strong, risk-adjusted returns over the long run, therefore imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, smart money investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do (like Melvin Capital’s recent GameStop losses). However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, as the current round of 13F filings has just ended, let’s examine the smart money sentiment towards SailPoint Technologies Holdings, Inc. (NYSE:SAIL).
Is SAIL stock a buy? The smart money was taking an optimistic view. The number of bullish hedge fund bets increased by 3 recently. SailPoint Technologies Holdings, Inc. (NYSE:SAIL) was in 32 hedge funds’ portfolios at the end of the fourth quarter of 2020. The all time high for this statistic is 29. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that SAIL isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings). There were 29 hedge funds in our database with SAIL positions at the end of the third quarter.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 124 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Gil Simon of SoMa Equity Partners
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, the CBD market is growing at a 33% annualized rate, so we are taking a closer look at this under-the-radar hemp stock. We go through lists like the 10 best biotech stocks under $10 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. Now let’s take a glance at the latest hedge fund action surrounding SailPoint Technologies Holdings, Inc. (NYSE:SAIL).
Do Hedge Funds Think SAIL Is A Good Stock To Buy Now?
At Q4’s end, a total of 32 of the hedge funds tracked by Insider Monkey were long this stock, a change of 10% from one quarter earlier. On the other hand, there were a total of 25 hedge funds with a bullish position in SAIL 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.
More specifically, HMI Capital was the largest shareholder of SailPoint Technologies Holdings, Inc. (NYSE:SAIL), with a stake worth $296.7 million reported as of the end of December. Trailing HMI Capital was SoMa Equity Partners, which amassed a stake valued at $282.2 million. Eminence Capital, RGM Capital, and Jeneq 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 HMI Capital allocated the biggest weight to SailPoint Technologies Holdings, Inc. (NYSE:SAIL), around 11.94% of its 13F portfolio. Jeneq Management is also relatively very bullish on the stock, designating 8.84 percent of its 13F equity portfolio to SAIL.
As one would reasonably expect, some big names were breaking ground themselves. Jeneq Management, managed by Sanjay Venkat, created the most valuable position in SailPoint Technologies Holdings, Inc. (NYSE:SAIL). Jeneq Management had $29.2 million invested in the company at the end of the quarter. Israel Englander’s Millennium Management also initiated a $20.6 million position during the quarter. The following funds were also among the new SAIL investors: Andrew Kurita’s Kettle Hill Capital Management, Ben Jacobs’s Anomaly Capital Management, and Zachary Miller’s Parian Global Management.
Let’s now review hedge fund activity in other stocks similar to SailPoint Technologies Holdings, Inc. (NYSE:SAIL). These stocks are Curtiss-Wright Corp. (NYSE:CW), TFI International Inc. (NYSE:TFII), BOK Financial Corporation (NASDAQ:BOKF), Nexstar Media Group, Inc. (NASDAQ:NXST), Ashland Global Holdings Inc.. (NYSE:ASH), Flowserve Corporation (NYSE:FLS), and Flowers Foods, Inc. (NYSE:FLO). This group of stocks’ market valuations match SAIL’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CW | 23 | 245187 | -3 |
| TFII | 10 | 78114 | -3 |
| BOKF | 26 | 361027 | 5 |
| NXST | 44 | 891159 | 3 |
| ASH | 38 | 1114289 | -8 |
| FLS | 21 | 148236 | 2 |
| FLO | 27 | 289063 | -3 |
| Average | 27 | 446725 | -1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 27 hedge funds with bullish positions and the average amount invested in these stocks was $447 million. That figure was $1003 million in SAIL’s case. Nexstar Media Group, Inc. (NASDAQ:NXST) is the most popular stock in this table. On the other hand TFI International Inc. (NYSE:TFII) is the least popular one with only 10 bullish hedge fund positions. SailPoint Technologies Holdings, Inc. (NYSE:SAIL) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for SAIL is 70.4. 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 12.2% in 2021 through April 12th and beat the market again by 1.5 percentage points. Unfortunately SAIL wasn’t nearly as popular as these 30 stocks and hedge funds that were betting on SAIL were disappointed as the stock returned -8.2% since the end of December (through 4/12) 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.
Follow Sailpoint Technologies Holdings Inc. (NYSE:SAIL)
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Disclosure: None. This article was originally published at Insider Monkey.
