Is SONO A Good Stock To Buy According To Hedge Funds?

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 817 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of September 30th, about a month before the elections. In this article we look at what those investors think of Sonos, Inc. (NASDAQ:SONO).

Is SONO a good stock to buy? Prominent investors were selling. The number of long hedge fund bets dropped by 3 lately. Sonos, Inc. (NASDAQ:SONO) was in 32 hedge funds’ portfolios at the end of September. The all time high for this statistic is 35. Our calculations also showed that SONO isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks).

Video: Watch our video about the top 5 most popular hedge fund stocks.

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 monthly stock picks returned 113% since March 2017 and outperformed the S&P 500 ETFs by more than 66 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, the House passed a landmark bill decriminalizing marijuana. So, we are checking out this under the radar cannabis stock right now. We go through lists like the 15 best blue chip stocks to buy to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. With all of this in mind we’re going to take a look at the key hedge fund action regarding Sonos, Inc. (NASDAQ:SONO).

Do Hedge Funds Think SONO Is A Good Stock To Buy Now?

At Q3’s end, a total of 32 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -9% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in SONO over the last 21 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.

More specifically, Hawk Ridge Management was the largest shareholder of Sonos, Inc. (NASDAQ:SONO), with a stake worth $51 million reported as of the end of September. Trailing Hawk Ridge Management was Point72 Asset Management, which amassed a stake valued at $49.4 million. Trigran Investments, Citadel Investment Group, and Woodson Capital Management were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Greenspring Associates allocated the biggest weight to Sonos, Inc. (NASDAQ:SONO), around 18.87% of its 13F portfolio. Trigran Investments is also relatively very bullish on the stock, dishing out 8.46 percent of its 13F equity portfolio to SONO.

Seeing as Sonos, Inc. (NASDAQ:SONO) has experienced bearish sentiment from the aggregate hedge fund industry, it’s easy to see that there is a sect of hedgies that decided to sell off their entire stakes by the end of the third quarter. Intriguingly, Mark Hart III’s Corriente Advisors sold off the biggest stake of the 750 funds tracked by Insider Monkey, worth about $23 million in stock. Kamyar Khajavi’s fund, MIK Capital, also cut its stock, about $7.8 million worth. These transactions are intriguing to say the least, as total hedge fund interest was cut by 3 funds by the end of the third quarter.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Sonos, Inc. (NASDAQ:SONO) but similarly valued. These stocks are O-I Glass, Inc. (NYSE:OI), Washington Real Estate Investment Trust (NYSE:WRE), Revance Therapeutics Inc (NASDAQ:RVNC), Cavco Industries, Inc. (NASDAQ:CVCO), Progress Software Corporation (NASDAQ:PRGS), Prelude Therapeutics Incorporated (NASDAQ:PRLD), and International Bancshares Corp (NASDAQ:IBOC). All of these stocks’ market caps are closest to SONO’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 18.6 hedge funds with bullish positions and the average amount invested in these stocks was $245 million. That figure was $336 million in SONO’s case. O-I Glass, Inc. (NYSE:OI) is the most popular stock in this table. On the other hand Washington Real Estate Investment Trust (NYSE:WRE) is the least popular one with only 13 bullish hedge fund positions. Compared to these stocks Sonos, Inc. (NASDAQ:SONO) is more popular among hedge funds. Our overall hedge fund sentiment score for SONO is 79.4. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks returned 33.3% in 2020 through December 18th but still managed to beat the market by 16.4 percentage points. Hedge funds were also right about betting on SONO as the stock returned 60.3% since the end of September (through 12/18) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.

Disclosure: None. This article was originally published at Insider Monkey.