At Insider Monkey, we pore over the filings of nearly 873 top investment firms every quarter, a process we have now completed for the latest reporting period. The data we’ve gathered as a result gives us access to a wealth of collective knowledge based on these firms’ portfolio holdings as of June 30th. In this article, we will use that wealth of knowledge to determine whether or not Science Applications International Corp (NYSE:SAIC) makes for a good investment right now.
Science Applications International Corp (NYSE:SAIC) investors should be aware of an increase in support from the world’s most elite money managers of late. Science Applications International Corp (NYSE:SAIC) was in 22 hedge funds’ portfolios at the end of June. The all time high for this statistic is 35. Our calculations also showed that SAIC isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 79 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
Bernard Horn of Polaris Capital Management
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. 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 homepage. Keeping this in mind we’re going to take a glance at the key hedge fund action regarding Science Applications International Corp (NYSE:SAIC).
Do Hedge Funds Think SAIC Is A Good Stock To Buy Now?
At the end of June, a total of 22 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 22% from one quarter earlier. By comparison, 35 hedge funds held shares or bullish call options in SAIC a year ago. With the smart money’s sentiment swirling, there exists a select group of key hedge fund managers who were boosting their holdings meaningfully (or already accumulated large positions).
Of the funds tracked by Insider Monkey, Adage Capital Management, managed by Phill Gross and Robert Atchinson, holds the biggest position in Science Applications International Corp (NYSE:SAIC). Adage Capital Management has a $59.9 million position in the stock, comprising 0.1% of its 13F portfolio. The second largest stake is held by Will Cook of Sunriver Management, with a $50.6 million position; 8.6% of its 13F portfolio is allocated to the stock. Other professional money managers that hold long positions consist of Bernard Horn’s Polaris Capital Management, Murray Stahl’s Horizon Asset Management and Anthony Bozza’s Lakewood Capital Management. In terms of the portfolio weights assigned to each position Sunriver Management allocated the biggest weight to Science Applications International Corp (NYSE:SAIC), around 8.61% of its 13F portfolio. Huber Capital Management is also relatively very bullish on the stock, earmarking 1.83 percent of its 13F equity portfolio to SAIC.
Now, key hedge funds have been driving this bullishness. Adage Capital Management, managed by Phill Gross and Robert Atchinson, initiated the most valuable position in Science Applications International Corp (NYSE:SAIC). Adage Capital Management had $59.9 million invested in the company at the end of the quarter. D. E. Shaw’s D E Shaw also made a $0.5 million investment in the stock during the quarter. The other funds with brand new SAIC positions are Jinghua Yan’s TwinBeech Capital, Karim Abbadi and Edward McBride’s Centiva Capital, and Ryan Tolkin (CIO)’s Schonfeld Strategic Advisors.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Science Applications International Corp (NYSE:SAIC) but similarly valued. These stocks are Chesapeake Energy Corporation (NYSE:CHK), Clean Harbors Inc (NYSE:CLH), Essent Group Ltd (NYSE:ESNT), Companhia de Saneamento Basico (NYSE:SBS), SunPower Corporation (NASDAQ:SPWR), RBC Bearings Incorporated (NASDAQ:ROLL), and Ortho Clinical Diagnostics Holdings plc (NASDAQ:OCDX). This group of stocks’ market caps are similar to SAIC’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CHK | 43 | 1914857 | 1 |
| CLH | 24 | 359968 | -3 |
| ESNT | 22 | 318403 | -2 |
| SBS | 11 | 255465 | 1 |
| SPWR | 25 | 231783 | 7 |
| ROLL | 9 | 37769 | -1 |
| OCDX | 21 | 234023 | -2 |
| Average | 22.1 | 478895 | 0.1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 22.1 hedge funds with bullish positions and the average amount invested in these stocks was $479 million. That figure was $271 million in SAIC’s case. Chesapeake Energy Corporation (NYSE:CHK) is the most popular stock in this table. On the other hand RBC Bearings Incorporated (NASDAQ:ROLL) is the least popular one with only 9 bullish hedge fund positions. Science Applications International Corp (NYSE:SAIC) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for SAIC is 47. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 24% in 2021 through October 22nd and still beat the market by 1.6 percentage points. A small number of hedge funds were also right about betting on SAIC as the stock returned 5.6% since the end of the second quarter (through 10/22) and outperformed the market by an even larger margin.
Follow Science Applications International Corp (NYSE:SAIC)
Follow Science Applications International Corp (NYSE:SAIC)
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Disclosure: None. This article was originally published at Insider Monkey.
