Is SLM Corp (SLM) A Good Stock To Buy?

Reputable billionaire investors such as Nelson Peltz and David Tepper generate exorbitant profits for their wealthy accredited investors (a minimum of $1 million in investable assets would be required to invest in a hedge fund and most successful hedge funds won’t accept your savings unless you commit at least $5 million) by pinpointing winning small-cap stocks. There is little or no publicly-available information at all on some of these small companies, which makes it hard for an individual investor to pin down a winner within the small-cap space. However, hedge funds and other big asset managers can do the due diligence and analysis for you instead, thanks to their highly-skilled research teams and vast resources to conduct an appropriate evaluation process. Looking for potential winners within the small-cap galaxy of stocks? We believe following the smart money is a good starting point.

SLM Corp (NASDAQ:SLM) has experienced a decrease in support from the world’s most successful money managers recently. SLM was in 19 hedge funds’ portfolios at the end of September. There were 24 hedge funds in our database with SLM holdings at the end of the previous quarter. At the end of this article we will also compare SLM to other stocks including Columbia Property Trust Inc (NYSE:CXP), Worthington Industries, Inc. (NYSE:WOR), and Horizon Pharma Inc (NASDAQ:HZNP) to get a better sense of its popularity.

At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.

Matej Kastelic/Shutterstock.com

What does the smart money think about SLM Corp (NASDAQ:SLM)?

At Q3’s end, a total of 19 of the hedge funds tracked by Insider Monkey held long positions in this stock, a decline of 21% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards SLM over the last 5 quarters. With hedge funds’ positions undergoing their usual ebb and flow, there exists a few notable hedge fund managers who were increasing their stakes considerably (or already accumulated large positions).

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Cardinal Capital, led by Amy Minella, holds the number one position in SLM Corp (NASDAQ:SLM). Cardinal Capital has a $38.2 million position in the stock, comprising 1.8% of its 13F portfolio. The second most bullish fund manager is Hutchin Hill Capital, led by Neil Chriss, which holds a $34.4 million position. Other members of the smart money with similar optimism include Anand Parekh’s Alyeska Investment Group, Gregg Moskowitz’s Interval Partners and Malcolm Fairbairn’s Ascend Capital. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.

Now that we’ve mentioned the most bullish investors, let’s also take a look at some funds that sold off their entire stakes in the stock during the third quarter. It’s worth mentioning that Paul Tudor Jones’ Tudor Investment Corp sold off the largest investment of the 700 funds followed by Insider Monkey, totaling close to $0.4 million in stock, and Michael Platt and William Reeves’ BlueCrest Capital Mgmt. was right behind this move, as the fund said goodbye to about $0.3 million worth of shares.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as SLM Corp (NASDAQ:SLM) but similarly valued. These stocks are Columbia Property Trust Inc (NYSE:CXP), Worthington Industries, Inc. (NYSE:WOR), Horizon Pharma Inc (NASDAQ:HZNP), and Kate Spade & Co (NYSE:KATE). This group of stocks’ market caps are closest to SLM’s market cap.

As you can see these stocks had an average of 23 hedge funds with bullish positions and the average amount invested in these stocks was $378 million. That figure was $171 million in SLM’s case. Horizon Pharma Inc (NASDAQ:HZNP) is the most popular stock in this table. On the other hand Columbia Property Trust Inc (NYSE:CXP) is the least popular one with only 11 bullish hedge fund positions. SLM Corp (NASDAQ:SLM) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard HZNP might be a better candidate to consider taking a long position in.

Disclosure: None