Is Shutterfly, Inc. (SFLY) Going to Burn These Hedge Funds?

While the market driven by short-term sentiment influenced by uncertainty regarding the future of the interest rate environment in the US, the low commodity prices and the economic turmoil in China, many smart money investors are keeping their optimism regarding the current bull run, while still hedging many of their long positions. However, as we know, big investors usually buy stocks with strong fundamentals, which is why we believe we can profit from imitating them. In this article, we are going to take a look at the smart money sentiment surrounding Shutterfly, Inc. (NASDAQ:SFLY).

Shutterfly, Inc. (NASDAQ:SFLY) shares haven’t seen a lot of action during the third quarter. Overall, hedge fund sentiment was unchanged. The stock was in 27 hedge funds’ portfolios at the end of September. At the end of this article we will also compare SFLY to other stocks, including Talen Energy Corp (NYSE:TLN), Premier Inc (NASDAQ:PINC), and Apollo Investment Corp. (NASDAQ:AINV) to get a better sense of its popularity.

At the moment there are a large number of gauges stock market investors can use to grade stocks. A couple of the less utilized gauges are hedge fund and insider trading moves. We have shown that, historically, those who follow the best picks of the top investment managers can trounce the market by a very impressive margin (see the details here).

Keeping this in mind, let’s take a look at the recent action encompassing Shutterfly, Inc. (NASDAQ:SFLY).

Hedge fund activity in Shutterfly, Inc. (NASDAQ:SFLY)

At the end of the third quarter, a total of 27 of the hedge funds tracked by Insider Monkey were long this stock, flat over the quarter. With hedge funds’ capital changing hands, there exists a few key hedge fund managers who were boosting their holdings significantly (or already accumulated large positions).

Of the funds tracked by Insider Monkey, Fine Capital Partners, managed by Debra Fine, holds the biggest position in Shutterfly, Inc. (NASDAQ:SFLY). Fine Capital Partners has a $91 million position in the stock, comprising 8.9% of its 13F portfolio. The second largest stake is held by Marathon Partners, led by Mario Cibelli, holding a $59.7 million position; the fund has 25.8% of its 13F portfolio invested in the stock. Some other members of the smart money that hold long positions include Marc Majzner’s Clearline Capital, Peter S. Park’s Park West Asset Management and Claus Moller’s P2 Capital Partners.

In addition, there lies a certain “tier” of funds that decided to sell off their positions entirely last quarter. Interestingly, Lee Munder’s Lee Munder Capital Group said goodbye to the biggest position of the “upper crust” of funds followed by Insider Monkey, comprising about $16.9 million in stock. Spencer M. Waxman’s fund, Shannon River Fund Management, also dumped its holding, about $11.5 million worth. These moves are important to note, as total hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s check out hedge fund activity in other stocks similar to Shutterfly, Inc. (NASDAQ:SFLY). We will take a look at Talen Energy Corp (NYSE:TLN), Premier Inc (NASDAQ:PINC), Apollo Investment Corp. (NASDAQ:AINV), and Axovant Sciences Ltd (NYSE:AXON). This group of stocks’ market caps match SFLY’s market cap.

As you can see these stocks had an average of 17 hedge funds with bullish positions and the average amount invested in these stocks was $364 million. That figure was $414 million in SFLY’s case. Talen Energy Corp (NYSE:TLN) is the most popular stock in this table with a total of 20 long positions. On the other hand Axovant Sciences Ltd (NYSE:AXON) is the least popular one. Compared to these stocks Shutterfly, Inc. (NASDAQ:SFLY) 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.