We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (see why hell is coming).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. Hedge Funds and other institutional investors have just completed filing their 13Fs with the Securities and Exchange Commission, revealing their equity portfolios as of the end of June. At Insider Monkey, we follow nearly 835 active hedge funds and notable investors and by analyzing their 13F filings, we can determine the stocks that they are collectively bullish on. One of their picks is SailPoint Technologies Holdings, Inc. (NYSE:SAIL), so let’s take a closer look at the sentiment that surrounds it in the current quarter.
Is SailPoint Technologies Holdings, Inc. (NYSE:SAIL) a buy, sell, or hold? Money managers are taking a pessimistic view. The number of long hedge fund bets were trimmed by 1 lately. Our calculations also showed that SAIL isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings). SAIL was in 25 hedge funds’ portfolios at the end of the fourth quarter of 2019. There were 26 hedge funds in our database with SAIL holdings at the end of the previous 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 41 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 35.3% through March 3rd. 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
We leave no stone unturned when looking for the next great investment idea. For example, we believe electric vehicles and energy storage are set to become giant markets, and we want to take advantage of the declining lithium prices amid the COVID-19 pandemic. So we are checking out investment opportunities like this one. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now let’s review the key hedge fund action surrounding SailPoint Technologies Holdings, Inc. (NYSE:SAIL).
How are hedge funds trading SailPoint Technologies Holdings, Inc. (NYSE:SAIL)?
At the end of the fourth quarter, a total of 25 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -4% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards SAIL over the last 18 quarters. With hedgies’ sentiment swirling, there exists a few notable hedge fund managers who were boosting their stakes considerably (or already accumulated large positions).
Among these funds, SoMa Equity Partners held the most valuable stake in SailPoint Technologies Holdings, Inc. (NYSE:SAIL), which was worth $94.4 million at the end of the third quarter. On the second spot was Point72 Asset Management which amassed $44.6 million worth of shares. RGM Capital, Millennium Management, and Renaissance Technologies 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 SoMa Equity Partners allocated the biggest weight to SailPoint Technologies Holdings, Inc. (NYSE:SAIL), around 5.83% of its 13F portfolio. RGM Capital is also relatively very bullish on the stock, dishing out 2.17 percent of its 13F equity portfolio to SAIL.
Due to the fact that SailPoint Technologies Holdings, Inc. (NYSE:SAIL) has experienced a decline in interest from the smart money, it’s easy to see that there were a few funds who were dropping their entire stakes by the end of the third quarter. Intriguingly, David Rosen’s Rubric Capital Management sold off the largest investment of the “upper crust” of funds tracked by Insider Monkey, comprising an estimated $28 million in stock, and Eric Bannasch’s Cadian Capital was right behind this move, as the fund cut about $8.6 million worth. These transactions are interesting, as aggregate hedge fund interest was cut by 1 funds by the end of the third quarter.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as SailPoint Technologies Holdings, Inc. (NYSE:SAIL) but similarly valued. These stocks are Deluxe Corporation (NYSE:DLX), AssetMark Financial Holdings, Inc. (NYSE:AMK), Matador Resources Co (NYSE:MTDR), and Mack Cali Realty Corp (NYSE:CLI). This group of stocks’ market caps match SAIL’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| DLX | 29 | 162395 | 5 |
| AMK | 6 | 50409 | -4 |
| MTDR | 23 | 163971 | 7 |
| CLI | 15 | 133709 | 2 |
| Average | 18.25 | 127621 | 2.5 |
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 $128 million. That figure was $250 million in SAIL’s case. Deluxe Corporation (NYSE:DLX) is the most popular stock in this table. On the other hand AssetMark Financial Holdings, Inc. (NYSE:AMK) is the least popular one with only 6 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. 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 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. These stocks lost 13.0% in 2020 through April 6th but beat the market by 4.2 percentage points. Unfortunately SAIL wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on SAIL were disappointed as the stock returned -39.4% during the same time period and underperformed 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 many of these stocks already outperformed the market so far this year.
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.
