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 SLM Corp (NASDAQ:SLM).
Hedge fund interest in SLM Corp (NASDAQ:SLM) shares was flat at the end of last quarter. This is usually a negative indicator. Our calculations also showed that SLM isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings). At the end of this article we will also compare SLM to other stocks including Redfin Corporation (NASDAQ:RDFN), BRP Inc. (NASDAQ:DOOO), and Eastgroup Properties Inc (NYSE:EGP) to get a better sense of its popularity.
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. Hedge funds have more than $3.5 trillion in assets under management, so you can’t expect their entire portfolios to beat the market by large margins. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 79 percentage points since March 2017 (see the details here). So you can still find a lot of gems by following hedge funds’ moves today.
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. Now let’s go over the fresh hedge fund action regarding SLM Corp (NASDAQ:SLM).
Do Hedge Funds Think SLM Is A Good Stock To Buy Now?
Heading into the third quarter of 2021, a total of 27 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from the previous quarter. By comparison, 32 hedge funds held shares or bullish call options in SLM a year ago. With hedgies’ capital changing hands, there exists a select group of notable hedge fund managers who were upping their stakes considerably (or already accumulated large positions).
Among these funds, ValueAct Capital held the most valuable stake in SLM Corp (NASDAQ:SLM), which was worth $430.9 million at the end of the second quarter. On the second spot was Impactive Capital which amassed $179.1 million worth of shares. Arrowstreet Capital, GLG Partners, and Tiger 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 Impactive Capital allocated the biggest weight to SLM Corp (NASDAQ:SLM), around 14.85% of its 13F portfolio. Tiger Management is also relatively very bullish on the stock, dishing out 11.25 percent of its 13F equity portfolio to SLM.
Seeing as SLM Corp (NASDAQ:SLM) has experienced a decline in interest from hedge fund managers, it’s safe to say that there exists a select few money managers who sold off their entire stakes heading into Q3. It’s worth mentioning that Frank Fu’s CaaS Capital sold off the largest investment of all the hedgies monitored by Insider Monkey, valued at close to $22.9 million in stock, and Kenneth Squire’s 13D Management was right behind this move, as the fund said goodbye to about $10.8 million worth. These bearish behaviors are interesting, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s now review hedge fund activity in other stocks similar to SLM Corp (NASDAQ:SLM). These stocks are Redfin Corporation (NASDAQ:RDFN), BRP Inc. (NASDAQ:DOOO), Eastgroup Properties Inc (NYSE:EGP), Stericycle Inc (NASDAQ:SRCL), Omnicell, Inc. (NASDAQ:OMCL), TopBuild Corp (NYSE:BLD), and Ritchie Bros. Auctioneers (NYSE:RBA). All of these stocks’ market caps resemble SLM’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| RDFN | 17 | 572133 | -1 |
| DOOO | 19 | 175828 | 2 |
| EGP | 11 | 176852 | -2 |
| SRCL | 26 | 702935 | 2 |
| OMCL | 18 | 99734 | -1 |
| BLD | 22 | 233152 | 4 |
| RBA | 22 | 378831 | 3 |
| Average | 19.3 | 334209 | 1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 19.3 hedge funds with bullish positions and the average amount invested in these stocks was $334 million. That figure was $1091 million in SLM’s case. Stericycle Inc (NASDAQ:SRCL) is the most popular stock in this table. On the other hand Eastgroup Properties Inc (NYSE:EGP) is the least popular one with only 11 bullish hedge fund positions. Compared to these stocks SLM Corp (NASDAQ:SLM) is more popular among hedge funds. Our overall hedge fund sentiment score for SLM is 75.8. 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 24.9% in 2021 through October 15th and still beat the market by 4.5 percentage points. Unfortunately SLM wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on SLM were disappointed as the stock returned -16.8% since the end of the second quarter (through 10/15) 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.
Follow Slm Corp (NASDAQ:SLM)
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Disclosure: None. This article was originally published at Insider Monkey.
