Hedge fund managers like David Einhorn, Dan Loeb, 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: Sanmina Corporation (NASDAQ:SANM).
Sanmina Corporation (NASDAQ:SANM) was in 13 hedge funds’ portfolios at the end of the third quarter of 2018. SANM shareholders have witnessed a decrease in hedge fund interest recently. There were 15 hedge funds in our database with SANM positions at the end of the previous quarter. Our calculations also showed that SANM 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 review the recent hedge fund action surrounding Sanmina Corporation (NASDAQ:SANM).
What does the smart money think about Sanmina Corporation (NASDAQ:SANM)?
Heading into the fourth quarter of 2018, a total of 13 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -13% from the previous quarter. On the other hand, there were a total of 20 hedge funds with a bullish position in SANM at the beginning of this year. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Diamond Hill Capital was the largest shareholder of Sanmina Corporation (NASDAQ:SANM), with a stake worth $78 million reported as of the end of September. Trailing Diamond Hill Capital was Royce & Associates, which amassed a stake valued at $24.6 million. D E Shaw, Renaissance Technologies, and Millennium Management were also very fond of the stock, giving the stock large weights in their portfolios.
Due to the fact that Sanmina Corporation (NASDAQ:SANM) has experienced a decline in interest from hedge fund managers, we can see that there were a few hedge funds that slashed their positions entirely in the third quarter. It’s worth mentioning that Anand Parekh’s Alyeska Investment Group sold off the biggest stake of all the hedgies watched by Insider Monkey, worth close to $31.5 million in stock, and Glenn Russell Dubin’s Highbridge Capital Management was right behind this move, as the fund dropped about $3.8 million worth. These transactions are important to note, as total hedge fund interest dropped by 2 funds in the third quarter.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Sanmina Corporation (NASDAQ:SANM) but similarly valued. These stocks are World Fuel Services Corporation (NYSE:INT), Atara Biotherapeutics Inc (NASDAQ:ATRA), Camping World Holdings, Inc. (NYSE:CWH), and FBL Financial Group, Inc. (NYSE:FFG). This group of stocks’ market valuations resemble SANM’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| INT | 13 | 88029 | 0 |
| ATRA | 12 | 634292 | -2 |
| CWH | 17 | 157540 | 0 |
| FFG | 4 | 8943 | -1 |
| Average | 11.5 | 222201 | -0.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 11.5 hedge funds with bullish positions and the average amount invested in these stocks was $222 million. That figure was $145 million in SANM’s case. Camping World Holdings, Inc. (NYSE:CWH) is the most popular stock in this table. On the other hand FBL Financial Group, Inc. (NYSE:FFG) is the least popular one with only 4 bullish hedge fund positions. Sanmina Corporation (NASDAQ:SANM) 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. In this regard CWH might be a better candidate to consider a long position.
Disclosure: None. This article was originally published at Insider Monkey.
