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Hedge Funds Aren’t Done Buying Sonos, Inc. (SONO)

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After several tireless days we have finished crunching the numbers from nearly 900 13F filings issued by the elite hedge funds and other investment firms that we track at Insider Monkey, which disclosed those firms' equity portfolios as of March 31st. The results of that effort will be put on display in this article, as we share valuable insight into the smart money sentiment towards Sonos, Inc. (NASDAQ:SONO).

Sonos, Inc. (NASDAQ:SONO) shareholders have witnessed an increase in enthusiasm from smart money in recent months. Sonos, Inc. (NASDAQ:SONO) was in 46 hedge funds' portfolios at the end of March. The all time high for this statistic was 43. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that SONO isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings).

If you'd ask most shareholders, hedge funds are assumed to be underperforming, old financial tools of years past. While there are greater than 8000 funds in operation at the moment, Our experts look at the bigwigs of this club, about 850 funds. Most estimates calculate that this group of people preside over most of the hedge fund industry's total capital, and by monitoring their best stock picks, Insider Monkey has found various investment strategies that have historically outrun the market. Insider Monkey's flagship short hedge fund strategy outperformed the S&P 500 short ETFs by around 20 percentage points per annum since its inception in March 2017. Also, our monthly newsletter's portfolio of long stock picks returned 206.8% since March 2017 (through May 2021) and beat the S&P 500 Index by more than 115 percentage points. You can download a sample issue of this newsletter on our website .

Brad Farber Atika Capital
Brad Farber Atika Capital

Brad Farber of Atika Capital

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation, which is why we are checking out this inflation play. We go through lists like 10 best gold stocks to buy to identify promising stocks. 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 review the new hedge fund action regarding Sonos, Inc. (NASDAQ:SONO).

Do Hedge Funds Think SONO Is A Good Stock To Buy Now?

At the end of the first quarter, a total of 46 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 7% from one quarter earlier. On the other hand, there were a total of 33 hedge funds with a bullish position in SONO 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.

More specifically, Citadel Investment Group was the largest shareholder of Sonos, Inc. (NASDAQ:SONO), with a stake worth $95.6 million reported as of the end of March. Trailing Citadel Investment Group was Renaissance Technologies, which amassed a stake valued at $86.2 million. Two Sigma Advisors, D E Shaw, and Sandler Capital 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 Stony Point Capital allocated the biggest weight to Sonos, Inc. (NASDAQ:SONO), around 5.78% of its 13F portfolio. Trigran Investments is also relatively very bullish on the stock, designating 5.71 percent of its 13F equity portfolio to SONO.

Now, key hedge funds were breaking ground themselves. Sandler Capital Management, managed by Andrew Sandler, created the most valuable position in Sonos, Inc. (NASDAQ:SONO). Sandler Capital Management had $52.4 million invested in the company at the end of the quarter. Jacob Mitchell's Antipodes Partners also initiated a $23.7 million position during the quarter. The other funds with brand new SONO positions are Richard Walters II's Stony Point Capital, Brad Farber's Atika Capital, and Kamyar Khajavi's MIK Capital.

Let's now review hedge fund activity in other stocks - not necessarily in the same industry as Sonos, Inc. (NASDAQ:SONO) but similarly valued. These stocks are Qurate Retail, Inc. (NASDAQ:QRTEA), Home Bancshares, Inc. (Conway, AR) (NASDAQ:HOMB), Inovalon Holdings Inc (NASDAQ:INOV), Highwoods Properties Inc (NYSE:HIW), Ortho Clinical Diagnostics Holdings plc (NASDAQ:OCDX), PacWest Bancorp (NASDAQ:PACW), and Radian Group Inc (NYSE:RDN). All of these stocks' market caps resemble SONO's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position QRTEA,31,776294,-5 HOMB,6,48515,-6 INOV,17,108170,-5 HIW,20,117413,-1 OCDX,23,328347,23 PACW,31,599517,1 RDN,30,436078,-7 Average,22.6,344905,0 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 22.6 hedge funds with bullish positions and the average amount invested in these stocks was $345 million. That figure was $763 million in SONO's case. Qurate Retail, Inc. (NASDAQ:QRTEA) is the most popular stock in this table. On the other hand Home Bancshares, Inc. (Conway, AR) (NASDAQ:HOMB) is the least popular one with only 6 bullish hedge fund positions. Compared to these stocks Sonos, Inc. (NASDAQ:SONO) is more popular among hedge funds. Our overall hedge fund sentiment score for SONO is 88. 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 17.4% in 2021 through June 18th and still beat the market by 6.1 percentage points. Unfortunately SONO wasn't nearly as popular as these 5 stocks and hedge funds that were betting on SONO were disappointed as the stock returned -11.8% since the end of the first quarter (through 6/18) 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.