We know that hedge funds generate strong, risk-adjusted returns over the long run, therefore imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, smart money investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do (like Melvin Capital’s recent GameStop losses). However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, as the current round of 13F filings has just ended, let’s examine the smart money sentiment towards Sema4 Holdings Corp. (NASDAQ:SMFR).
Is Sema4 Holdings Corp. (NASDAQ:SMFR) undervalued? The smart money was getting more bullish. The number of bullish hedge fund positions moved up by 34 recently. Sema4 Holdings Corp. (NASDAQ:SMFR) was in 34 hedge funds’ portfolios at the end of September. Our calculations also showed that SMFR isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings).
Keith Meister of Corvex Capital
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so 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. Keeping this in mind we’re going to check out the fresh hedge fund action encompassing Sema4 Holdings Corp. (NASDAQ:SMFR).
Do Hedge Funds Think SMFR Is A Good Stock To Buy Now?
At third quarter’s end, a total of 34 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 34 from the second quarter of 2021. By comparison, 0 hedge funds held shares or bullish call options in SMFR a year ago. So, let’s examine 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, Deerfield Management, managed by James E. Flynn, holds the number one position in Sema4 Holdings Corp. (NASDAQ:SMFR) . Deerfield Management has a $105.1 million position in the stock, comprising 2.1% of its 13F portfolio. On Deerfield Management’s heels is Catherine D. Wood of ARK Investment Management, with a $71.3 million position; the fund has 0.2% of its 13F portfolio invested in the stock. Some other members of the smart money that are bullish comprise Masayoshi Son’s SB Management, Eli Casdin’s Casdin Capital and Keith Meister’s Corvex Capital. In terms of the portfolio weights assigned to each position SB Management allocated the biggest weight to Sema4 Holdings Corp. (NASDAQ:SMFR) , around 7.02% of its 13F portfolio. Berylson Capital Partners is also relatively very bullish on the stock, designating 5.15 percent of its 13F equity portfolio to SMFR.
With a general bullishness amongst the heavyweights, key money managers were leading the bulls’ herd. Deerfield Management, managed by James E. Flynn, established the largest position in Sema4 Holdings Corp. (NASDAQ:SMFR) . Deerfield Management had $105.1 million invested in the company at the end of the quarter. Catherine D. Wood’s ARK Investment Management also initiated a $71.3 million position during the quarter. The other funds with brand new SMFR positions are Masayoshi Son’s SB Management, Eli Casdin’s Casdin Capital, and Keith Meister’s Corvex Capital.
Let’s go over hedge fund activity in other stocks similar to Sema4 Holdings Corp. (NASDAQ:SMFR) . We will take a look at Argo Group International Holdings, Ltd. (NYSE:ARGO), Quanterix Corporation (NASDAQ:QTRX), Clean Energy Fuels Corp (NASDAQ:CLNE), Granite Construction Incorporated (NYSE:GVA), Microvision, Inc. (NASDAQ:MVIS), Poshmark, Inc. (NASDAQ:POSH), and Pretium Resources Inc (NYSE:PVG). All of these stocks’ market caps match SMFR’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| ARGO | 14 | 238823 | 2 |
| QTRX | 19 | 251379 | -1 |
| CLNE | 14 | 44764 | -3 |
| GVA | 15 | 27341 | 1 |
| MVIS | 6 | 10235 | -5 |
| POSH | 18 | 40616 | 3 |
| PVG | 21 | 123569 | -1 |
| Average | 15.3 | 105247 | -0.6 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 15.3 hedge funds with bullish positions and the average amount invested in these stocks was $105 million. That figure was $484 million in SMFR’s case. Pretium Resources Inc (NYSE:PVG) is the most popular stock in this table. On the other hand Microvision, Inc. (NASDAQ:MVIS) is the least popular one with only 6 bullish hedge fund positions. Compared to these stocks Sema4 Holdings Corp. (NASDAQ:SMFR) is more popular among hedge funds. Our overall hedge fund sentiment score for SMFR is 90. 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 28.6% in 2021 through November 30th and still beat the market by 5.6 percentage points. Unfortunately SMFR wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on SMFR were disappointed as the stock returned -12.1% since the end of the third quarter (through 11/30) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market since 2019.
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Disclosure: None. This article was originally published at Insider Monkey.
