Many investors, including Paul Tudor Jones or Stan Druckenmiller, have been saying before last year's Q4 market crash that the stock market is overvalued due to a low interest rate environment that leads to companies swapping their equity for debt and focusing mostly on short-term performance such as beating the quarterly earnings estimates. In the first half of 2019, most investors recovered all of their Q4 losses as sentiment shifted and optimism dominated the US China trade negotiations. Nevertheless, many of the stocks that delivered strong returns in the first half still sport strong fundamentals and their gains were more related to the general market sentiment rather than their individual performance and hedge funds kept their bullish stance. In this article we will find out how hedge fund sentiment to Sogou Inc. (NYSE:SOGO) changed recently.
Is Sogou Inc. (NYSE:SOGO) a buy here? The best stock pickers are becoming less hopeful. The number of bullish hedge fund bets went down by 1 in recent months. Our calculations also showed that SOGO isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
In the financial world there are plenty of signals market participants have at their disposal to value stocks. A couple of the most underrated signals are hedge fund and insider trading moves. We have shown that, historically, those who follow the top picks of the best fund managers can beat their index-focused peers by a very impressive amount (see the details here).
[caption id="attachment_26088" align="aligncenter" width="508"] Chase Coleman of Tiger Global[/caption]
We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. One of the most bullish analysts in America just put his money where his mouth is. He says, "I'm investing more today than I did back in early 2009." So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We even check out this option genius' weekly trade ideas. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager's investor letter and the stock already gained 20 percent. Keeping this in mind let's review the new hedge fund action regarding Sogou Inc. (NYSE:SOGO).
What have hedge funds been doing with Sogou Inc. (NYSE:SOGO)?
At Q3's end, a total of 4 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -20% from the second quarter of 2019. By comparison, 6 hedge funds held shares or bullish call options in SOGO a year ago. So, let's find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
When looking at the institutional investors followed by Insider Monkey, Renaissance Technologies, holds the number one position in Sogou Inc. (NYSE:SOGO). Renaissance Technologies has a $3.9 million position in the stock, comprising less than 0.1%% of its 13F portfolio. Sitting at the No. 2 spot is Chase Coleman of Tiger Global Management, with a $0.7 million position; less than 0.1%% of its 13F portfolio is allocated to the company. Some other hedge funds and institutional investors that hold long positions include Ken Griffin's Citadel Investment Group, and Michael Gelband's ExodusPoint Capital. In terms of the portfolio weights assigned to each position Tiger Global Management allocated the biggest weight to Sogou Inc. (NYSE:SOGO), around 0.0039% of its 13F portfolio. Renaissance Technologies is also relatively very bullish on the stock, dishing out 0.0033 percent of its 13F equity portfolio to SOGO.
Because Sogou Inc. (NYSE:SOGO) has faced declining sentiment from the entirety of the hedge funds we track, it's safe to say that there were a few funds that elected to cut their positions entirely in the third quarter. Interestingly, John Overdeck and David Siegel's Two Sigma Advisors cut the biggest position of all the hedgies followed by Insider Monkey, comprising about $0.2 million in stock. Ken Fisher's fund, Fisher Asset Management, also cut its stock, about $0.1 million worth. These moves are intriguing to say the least, as total hedge fund interest fell by 1 funds in the third quarter.
Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as Sogou Inc. (NYSE:SOGO) but similarly valued. These stocks are Matador Resources Co (NYSE:MTDR), Four Corners Property Trust, Inc. (NYSE:FCPT), Fabrinet (NYSE:FN), and Carbon Black, Inc. (NASDAQ:CBLK). This group of stocks' market valuations are closest to SOGO's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position MTDR,14,224980,2 FCPT,17,120222,-4 FN,21,175848,-4 CBLK,21,352066,4 Average,18.25,218279,-0.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 18.25 hedge funds with bullish positions and the average amount invested in these stocks was $218 million. That figure was $5 million in SOGO's case. Fabrinet (NYSE:FN) is the most popular stock in this table. On the other hand Matador Resources Co (NYSE:MTDR) is the least popular one with only 14 bullish hedge fund positions. Compared to these stocks Sogou Inc. (NYSE:SOGO) is even less popular than MTDR. Hedge funds dodged a bullet by taking a bearish stance towards SOGO. Our calculations showed that the top 20 most popular hedge fund stocks returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately SOGO wasn't nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); SOGO investors were disappointed as the stock returned -0.6% during the fourth quarter (through the end of November) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as 70 percent of these stocks already outperformed the market so far in Q4.
Disclosure: None. This article was originally published at Insider Monkey.