At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (Recession is Imminent: We Need A Travel Ban NOW). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards Sutter Rock Capital Corp. (NASDAQ:SSSS).
Hedge fund interest in Sutter Rock Capital Corp. (NASDAQ:SSSS) shares was flat at the end of last quarter. This is usually a negative indicator. At the end of this article we will also compare SSSS to other stocks including Middlefield Banc Corp. (NASDAQ:MBCN), Gamida Cell Ltd. (NASDAQ:GMDA), and CB Financial Services, Inc. (NASDAQ:CBFV) to get a better sense of its popularity. Video: Watch our video about the top 5 most popular hedge fund stocks.
In the 21st century investor’s toolkit there are a large number of tools stock market investors use to appraise their stock investments. A pair of the less known tools are hedge fund and insider trading signals. We have shown that, historically, those who follow the best picks of the elite hedge fund managers can trounce the S&P 500 by a very impressive amount (see the details here).
[caption id="attachment_341290" align="aligncenter" width="392"] Phillip Goldstein of Bulldog Investors[/caption]
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, We take a look at lists like the 10 most profitable companies in the world to identify the compounders that are likely to deliver double digit returns. We interview hedge fund managers and ask them about their best ideas. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. For example we are checking out stocks recommended/scorned by legendary Bill Miller. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind let's take a look at the recent hedge fund action surrounding Sutter Rock Capital Corp. (NASDAQ:SSSS).
How are hedge funds trading Sutter Rock Capital Corp. (NASDAQ:SSSS)?
At Q1's end, a total of 8 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the previous quarter. The graph below displays the number of hedge funds with bullish position in SSSS over the last 18 quarters. With hedge funds' positions undergoing their usual ebb and flow, there exists a few noteworthy hedge fund managers who were increasing their holdings meaningfully (or already accumulated large positions).
More specifically, Bulldog Investors was the largest shareholder of Sutter Rock Capital Corp. (NASDAQ:SSSS), with a stake worth $2.8 million reported as of the end of September. Trailing Bulldog Investors was Intrinsic Edge Capital, which amassed a stake valued at $1.9 million. Callodine Capital Management, Millennium Management, and Arrowstreet 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 Bulldog Investors allocated the biggest weight to Sutter Rock Capital Corp. (NASDAQ:SSSS), around 1.49% of its 13F portfolio. Callodine Capital Management is also relatively very bullish on the stock, dishing out 0.48 percent of its 13F equity portfolio to SSSS.
We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Beach Point Capital Management. One hedge fund selling its entire position doesn't always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don't think this is the case in this case because only one of the 800+ hedge funds tracked by Insider Monkey identified as a viable investment and initiated a position in the stock (that fund was Marshall Wace LLP).
Let's now review hedge fund activity in other stocks similar to Sutter Rock Capital Corp. (NASDAQ:SSSS). We will take a look at Middlefield Banc Corp. (NASDAQ:MBCN), Gamida Cell Ltd. (NASDAQ:GMDA), CB Financial Services, Inc. (NASDAQ:CBFV), and Union Bankshares, Inc. (NASDAQ:UNB). This group of stocks' market caps are similar to SSSS's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position MBCN,4,10830,-1 GMDA,5,7222,0 CBFV,4,2765,-2 UNB,1,547,0 Average,3.5,5341,-0.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 3.5 hedge funds with bullish positions and the average amount invested in these stocks was $5 million. That figure was $8 million in SSSS's case. Gamida Cell Ltd. (NASDAQ:GMDA) is the most popular stock in this table. On the other hand Union Bankshares, Inc. (NASDAQ:UNB) is the least popular one with only 1 bullish hedge fund positions. Compared to these stocks Sutter Rock Capital Corp. (NASDAQ:SSSS) is more popular among hedge funds. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks returned 12.2% in 2020 through June 17th but still managed to beat the market by 14.8 percentage points. Hedge funds were also right about betting on SSSS as the stock returned 48.1% so far in Q2 (through June 17th) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.
Disclosure: None. This article was originally published at Insider Monkey.