Is Sohu.com Inc (SOHU) a Good Stock to Buy?

There are several ways to beat the market, and investing in small cap stocks has historically been one of them. We like to improve the odds of beating the market further by examining what famous hedge fund operators such as Carl Icahn and George Soros think. Those hedge fund operators make billions of dollars each year by hiring the best and the brightest to do research on stocks, including small cap stocks that big brokerage houses simply don’t cover. Because of Carl Icahn and other successful funds’ exemplary historical records, we pay attention to their small cap picks. In this article, we use hedge fund filing data to analyze Sohu.com Inc (NASDAQ:SOHU).

Sohu.com Inc (NASDAQ:SOHU) investors should be aware of a decrease in enthusiasm from smart money recently. SOHU was in 16 hedge funds’ portfolios at the end of September. There were 18 hedge funds in our database with SOHU positions at the end of the previous quarter. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Plantronics, Inc. (NYSE:PLT), Banner Corporation (NASDAQ:BANR), and Nexstar Broadcasting Group, Inc. (NASDAQ:NXST) to gather more data points.

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.

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What does the smart money think about Sohu.com Inc (NASDAQ:SOHU)?

Heading into the fourth quarter of 2016, a total of 16 of the hedge funds tracked by Insider Monkey were bullish on this stock, a drop of 11% from the second quarter of 2016. Below, you can check out the change in hedge fund sentiment towards SOHU over the last 5 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, William B. Gray’s Orbis Investment Management has the largest position in Sohu.com Inc (NASDAQ:SOHU), worth close to $284.9 million, corresponding to 2% of its total 13F portfolio. The second most bullish fund manager is Renaissance Technologies, one of the largest hedge funds in the world, holding a $86.7 million position. Other hedge funds and institutional investors that hold long positions contain Lei Zhang’s Hillhouse Capital Management, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital and D. E. Shaw’s D E Shaw. We should note that Orbis Investment Management is 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 dumped their entire stakes in the stock during the third quarter. It’s worth mentioning that Jacob Gottlieb’s Visium Asset Management dumped the biggest position of the 700 funds watched by Insider Monkey, totaling close to $3.4 million in stock, and Matthew Hulsizer’s PEAK6 Capital Management was right behind this move, as the fund dumped about $2 million worth of shares.

Let’s check out hedge fund activity in other stocks similar to Sohu.com Inc (NASDAQ:SOHU). These stocks are Plantronics, Inc. (NYSE:PLT), Banner Corporation (NASDAQ:BANR), Nexstar Broadcasting Group, Inc. (NASDAQ:NXST), and Euronav NV Ordinary Shares (NYSE:EURN). This group of stocks’ market values resemble SOHU’s market value.

As you can see these stocks had an average of 22 hedge funds with bullish positions and the average amount invested in these stocks was $301 million. That figure was $498 million in SOHU’s case. Nexstar Broadcasting Group, Inc. (NASDAQ:NXST) is the most popular stock in this table. On the other hand Plantronics, Inc. (NYSE:PLT) is the least popular one with only 12 bullish hedge fund positions. Sohu.com Inc (NASDAQ:SOHU) 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 NXST might be a better candidate to consider taking a long position in.

Disclosure: None