Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the fourth quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 6 years and analyze what the smart money thinks of SMART Global Holdings, Inc. (NASDAQ:SGH) based on that data.
SMART Global Holdings, Inc. (NASDAQ:SGH) was in 16 hedge funds’ portfolios at the end of the first quarter of 2021. The all time high for this statistic is 18. SGH has seen a decrease in support from the world’s most elite money managers recently. There were 18 hedge funds in our database with SGH positions at the end of the fourth quarter. Our calculations also showed that SGH isn’t among the 30 most popular stocks among hedge funds (click for Q1 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 115 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.
Charles Clough of Clough Capital Partners
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, pet market is growing at a 7% annual rate and is expected to reach $110 billion in 2021. So, we are checking out the 5 best stocks for animal lovers. We go through lists like the 15 best Jim Cramer stocks to identify the next Tesla that will deliver outsized returns. 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 go over the new hedge fund action encompassing SMART Global Holdings, Inc. (NASDAQ:SGH).
Do Hedge Funds Think SGH Is A Good Stock To Buy Now?
At the end of March, a total of 16 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -11% from the fourth quarter of 2020. On the other hand, there were a total of 17 hedge funds with a bullish position in SGH a year ago. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Silver Lake Partners was the largest shareholder of SMART Global Holdings, Inc. (NASDAQ:SGH), with a stake worth $329.8 million reported as of the end of March. Trailing Silver Lake Partners was Crosslink Capital, which amassed a stake valued at $29.3 million. Clough Capital Partners, Arrowstreet Capital, and Two Sigma Advisors 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 Crosslink Capital allocated the biggest weight to SMART Global Holdings, Inc. (NASDAQ:SGH), around 5.29% of its 13F portfolio. Silver Lake Partners is also relatively very bullish on the stock, dishing out 3.29 percent of its 13F equity portfolio to SGH.
Judging by the fact that SMART Global Holdings, Inc. (NASDAQ:SGH) has experienced declining sentiment from the entirety of the hedge funds we track, it’s easy to see that there was a specific group of fund managers that slashed their full holdings heading into Q2. Interestingly, Valerie Malter’s Matarin Capital sold off the largest investment of the “upper crust” of funds watched by Insider Monkey, worth an estimated $4.2 million in stock. Mika Toikka’s fund, AlphaCrest Capital Management, also cut its stock, about $0.8 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest was cut by 2 funds heading into Q2.
Let’s go over hedge fund activity in other stocks similar to SMART Global Holdings, Inc. (NASDAQ:SGH). These stocks are Berkshire Hills Bancorp, Inc. (NYSE:BHLB), Diversified Healthcare Trust (NASDAQ:DHC), Oceaneering International, Inc. (NYSE:OII), RadNet Inc. (NASDAQ:RDNT), Tabula Rasa HealthCare, Inc. (NASDAQ:TRHC), TransMedics Group, Inc. (NASDAQ:TMDX), and Protagonist Therapeutics, Inc. (NASDAQ:PTGX). This group of stocks’ market values match SGH’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| BHLB | 11 | 35517 | -6 |
| DHC | 10 | 50977 | -4 |
| OII | 20 | 81960 | 0 |
| RDNT | 14 | 76988 | 2 |
| TRHC | 7 | 10073 | 3 |
| TMDX | 3 | 14241 | -1 |
| PTGX | 20 | 399766 | -3 |
| Average | 12.1 | 95646 | -1.3 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 12.1 hedge funds with bullish positions and the average amount invested in these stocks was $96 million. That figure was $399 million in SGH’s case. Oceaneering International, Inc. (NYSE:OII) is the most popular stock in this table. On the other hand TransMedics Group, Inc. (NASDAQ:TMDX) is the least popular one with only 3 bullish hedge fund positions. SMART Global Holdings, Inc. (NASDAQ:SGH) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for SGH is 67.9. 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. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. 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 28.5% in 2021 through July 23rd and beat the market again by 10.1 percentage points. Unfortunately SGH wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on SGH were disappointed as the stock returned 2.3% since the end of March (through 7/23) 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 many of these stocks already outperformed the market since 2019.
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Disclosure: None. This article was originally published at Insider Monkey.
