Billionaire hedge fund managers such as Steve Cohen and Stan Druckenmiller can generate millions or even billions of dollars every year by pinning down high-potential small-cap stocks and pouring cash into these candidates. Small-cap stocks are overlooked by most investors, brokerage houses, and financial services hubs, while the unlimited research abilities of the big players within the hedge fund industry can easily identify the undervalued and high-potential stocks that reside the ignored corners of equity markets. There are numerous small-cap stocks that have turned out to be great winners, which is one of the main reasons the Insider Monkey team pays close attention to the hedge fund activity in relation to these stocks.
Is SandRidge Energy Inc. (NYSE:SD) a bargain? Hedge funds are taking a bearish view. The number of long hedge fund positions were cut by 1 recently. Our calculations also showed that SD isn’t among the 30 most popular stocks among hedge funds.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s flagship best performing hedge funds strategy returned 6.3% year to date (through December 3rd) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 18 percentage points since its inception (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
We’re going to check out the latest hedge fund action surrounding SandRidge Energy Inc. (NYSE:SD).
What have hedge funds been doing with SandRidge Energy Inc. (NYSE:SD)?
Heading into the fourth quarter of 2018, a total of 19 of the hedge funds tracked by Insider Monkey were long this stock, a change of -5% from the previous quarter. The graph below displays the number of hedge funds with bullish position in SD over the last 13 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in SandRidge Energy Inc. (NYSE:SD) was held by Icahn Capital LP, which reported holding $52.4 million worth of stock at the end of September. It was followed by Rubric Capital Management with a $14.7 million position. Other investors bullish on the company included GLG Partners, Cannell Capital, and Paulson & Co.
Judging by the fact that SandRidge Energy Inc. (NYSE:SD) has experienced bearish sentiment from the smart money, it’s safe to say that there is a sect of hedge funds who were dropping their full holdings in the third quarter. Intriguingly, Michael Kao’s Akanthos Capital sold off the biggest stake of the “upper crust” of funds watched by Insider Monkey, worth about $8.3 million in stock. Steve Cohen’s fund, Point72 Asset Management, also dropped its stock, about $0.8 million worth. These transactions are important to note, as aggregate hedge fund interest fell by 1 funds in the third quarter.
Let’s now take a look at hedge fund activity in other stocks similar to SandRidge Energy Inc. (NYSE:SD). These stocks are Avid Bioservices, Inc. (NASDAQ:CDMO), First Trust NASDAQ ABA Community Bk ETF (NASDAQ:QABA), Nuveen New York Quality Municipal Income Fund (NYSE:NAN), and Agilysys, Inc. (NASDAQ:AGYS). This group of stocks’ market valuations resemble SD’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CDMO | 11 | 16233 | 5 |
| QABA | 2 | 6358 | 1 |
| NAN | 1 | 651 | -1 |
| AGYS | 12 | 146882 | -1 |
| Average | 6.5 | 42531 | 1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 6.5 hedge funds with bullish positions and the average amount invested in these stocks was $43 million. That figure was $113 million in SD’s case. Agilysys, Inc. (NASDAQ:AGYS) is the most popular stock in this table. On the other hand Nuveen New York Quality Municipal Income Fund (NYSE:NAN) is the least popular one with only 1 bullish hedge fund positions. Compared to these stocks SandRidge Energy Inc. (NYSE:SD) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.
Disclosure: None. This article was originally published at Insider Monkey.
