Most investors tend to think that hedge funds and other asset managers are worthless, as they cannot beat even simple index fund portfolios. In fact, most people expect hedge funds to compete with and outperform the bull market that we have witnessed in recent years. However, hedge funds are generally partially hedged and aim at delivering attractive risk-adjusted returns rather than following the ups and downs of equity markets hoping that they will outperform the broader market. Our research shows that certain hedge funds do have great stock picking skills (and we can identify these hedge funds in advance pretty accurately), so let’s take a glance at the smart money sentiment towards Sientra Inc (NASDAQ:SIEN).
Hedge fund interest in Sientra Inc (NASDAQ:SIEN) shares was flat at the end of last quarter. This is usually a negative indicator. Our calculations also showed that SIEN 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 SIEN to other stocks including Franklin Covey Co. (NYSE:FC), Reliant Bancorp, Inc. (NASDAQ:RBNC), and Bridgewater Bancshares, Inc. (NASDAQ:BWB) to get a better sense of its popularity.
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 185.4% since March 2017 and outperformed the S&P 500 ETFs by more than 79 percentage points (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Chuck Royce of Royce & Associates
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. With all of this in mind we’re going to take a peek at the fresh hedge fund action encompassing Sientra Inc (NASDAQ:SIEN).
Do Hedge Funds Think SIEN Is A Good Stock To Buy Now?
At the end of June, a total of 21 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from the first quarter of 2020. By comparison, 9 hedge funds held shares or bullish call options in SIEN a year ago. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Millennium Management held the most valuable stake in Sientra Inc (NASDAQ:SIEN), which was worth $20.2 million at the end of the second quarter. On the second spot was Granite Point Capital which amassed $15.9 million worth of shares. Royce & Associates, Rima Senvest Management, and Driehaus Capital 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 Soleus Capital allocated the biggest weight to Sientra Inc (NASDAQ:SIEN), around 1.79% of its 13F portfolio. Granite Point Capital is also relatively very bullish on the stock, dishing out 0.6 percent of its 13F equity portfolio to SIEN.
Seeing as Sientra Inc (NASDAQ:SIEN) has faced a decline in interest from the smart money, it’s easy to see that there were a few funds who were dropping their entire stakes by the end of the second quarter. It’s worth mentioning that Josh Goldberg’s G2 Investment Partners Management sold off the biggest stake of the 750 funds followed by Insider Monkey, comprising close to $1.9 million in stock. Rob Citrone’s fund, Discovery Capital Management, also dropped its stock, about $1.5 million worth. These moves are intriguing to say the least, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s check out hedge fund activity in other stocks similar to Sientra Inc (NASDAQ:SIEN). These stocks are Franklin Covey Co. (NYSE:FC), Reliant Bancorp, Inc. (NASDAQ:RBNC), Bridgewater Bancshares, Inc. (NASDAQ:BWB), Forte Biosciences, Inc. (NASDAQ:FBRX), RR Donnelley & Sons Company (NASDAQ:RRD), International General Insurance Holdings Ltd. (NASDAQ:IGIC), and CapStar Financial Holdings, Inc. (NASDAQ:CSTR). This group of stocks’ market caps are similar to SIEN’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| FC | 9 | 16488 | -1 |
| RBNC | 5 | 11478 | -1 |
| BWB | 8 | 17333 | 1 |
| FBRX | 13 | 97776 | -5 |
| RRD | 17 | 63231 | -6 |
| IGIC | 10 | 19559 | 0 |
| CSTR | 13 | 27705 | 1 |
| Average | 10.7 | 36224 | -1.6 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 10.7 hedge funds with bullish positions and the average amount invested in these stocks was $36 million. That figure was $119 million in SIEN’s case. RR Donnelley & Sons Company (NASDAQ:RRD) is the most popular stock in this table. On the other hand Reliant Bancorp, Inc. (NASDAQ:RBNC) is the least popular one with only 5 bullish hedge fund positions. Compared to these stocks Sientra Inc (NASDAQ:SIEN) is more popular among hedge funds. Our overall hedge fund sentiment score for SIEN is 85. 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. Unfortunately SIEN wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on SIEN were disappointed as the stock returned -30.2% since the end of the second quarter (through 10/22) 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 Sientra Inc. (NASDAQ:SIEN)
Follow Sientra Inc. (NASDAQ:SIEN)
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Disclosure: None. This article was originally published at Insider Monkey.
