Hedge fund managers like David Einhorn, Bill Ackman, or Carl Icahn became billionaires through reaping large profits for their investors, which is why piggybacking their stock picks may provide us with significant returns as well. Many hedge funds, like Paul Singer’s Elliott Management, are pretty secretive, but we can still get some insights by analyzing their quarterly 13F filings. One of the most fertile grounds for large abnormal returns is hedge funds’ most popular small-cap picks, which are not so widely followed and often trade at a discount to their intrinsic value. In this article we will check out hedge fund activity in another small-cap stock: Sangamo Therapeutics, Inc. (NASDAQ:SGMO).
Sangamo Therapeutics, Inc. (NASDAQ:SGMO) was in 17 hedge funds’ portfolios at the end of June. SGMO investors should pay attention to a decrease in support from the world’s most elite money managers recently. There were 19 hedge funds in our database with SGMO positions at the end of the previous quarter. Our calculations also showed that SGMO isn’t among the 30 most popular stocks among hedge funds (see the video below).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
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 has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (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 25.7% through September 30, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. We’re going to go over the recent hedge fund action regarding Sangamo Therapeutics, Inc. (NASDAQ:SGMO).
Hedge fund activity in Sangamo Therapeutics, Inc. (NASDAQ:SGMO)
Heading into the third quarter of 2019, a total of 17 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -11% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards SGMO over the last 16 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
When looking at the institutional investors followed by Insider Monkey, Ken Griffin’s Citadel Investment Group has the biggest position in Sangamo Therapeutics, Inc. (NASDAQ:SGMO), worth close to $20.5 million, comprising less than 0.1%% of its total 13F portfolio. The second largest stake is held by Eli Casdin of Casdin Capital, with a $16.5 million position; 1.5% of its 13F portfolio is allocated to the company. Some other peers that hold long positions include Julian Baker and Felix Baker’s Baker Bros. Advisors, Renaissance Technologies and Ken Griffin’s Citadel Investment Group.
Judging by the fact that Sangamo Therapeutics, Inc. (NASDAQ:SGMO) has faced falling interest from the smart money, it’s safe to say that there was a specific group of money managers that elected to cut their full holdings heading into Q3. Interestingly, D. E. Shaw’s D E Shaw sold off the biggest position of the 750 funds monitored by Insider Monkey, comprising close to $1.7 million in stock, and Michael S. Weiss and Lindsay A. Rosenwald’s Opus Point Partners Management was right behind this move, as the fund sold off about $0.3 million worth. These transactions are intriguing to say the least, as total hedge fund interest dropped by 2 funds heading into Q3.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Sangamo Therapeutics, Inc. (NASDAQ:SGMO) but similarly valued. We will take a look at Cardtronics plc (NASDAQ:CATM), Hovnanian Enterprises, Inc. (NYSE:HOV), SM Energy Company (NYSE:SM), and Helix Energy Solutions Group Inc. (NYSE:HLX). This group of stocks’ market values resemble SGMO’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CATM | 19 | 331653 | 1 |
| HOV | 3 | 2686 | 0 |
| SM | 18 | 205491 | -3 |
| HLX | 11 | 97055 | -5 |
| Average | 12.75 | 159221 | -1.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 12.75 hedge funds with bullish positions and the average amount invested in these stocks was $159 million. That figure was $69 million in SGMO’s case. Cardtronics plc (NASDAQ:CATM) is the most popular stock in this table. On the other hand Hovnanian Enterprises, Inc. (NYSE:HOV) is the least popular one with only 3 bullish hedge fund positions. Sangamo Therapeutics, Inc. (NASDAQ:SGMO) 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 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately SGMO wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on SGMO were disappointed as the stock returned -16% during the third quarter 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.
Disclosure: None. This article was originally published at Insider Monkey.
