Do Hedge Funds Love Sundial Growers Inc. (SNDL)?
With the first-quarter round of 13F filings behind us it is time to take a look at the stocks in which some of the best money managers in the world preferred to invest or sell heading into the second quarter. One of these stocks was Sundial Growers Inc. (NASDAQ:SNDL).
Is Sundial Growers Inc. (NASDAQ:SNDL) ready to rally soon? Prominent investors are buying. The number of bullish hedge fund positions advanced by 8 recently. Our calculations also showed that SNDL 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.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds' large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 27.8% through November 21, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
[caption id="attachment_26575" align="alignnone" width="600"]
Louis Bacon Moore of Moore Capital[/caption]
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world's largest cannabis market, so we check out this European marijuana stock pitch. 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 also rely on the best performing hedge funds' buy/sell signals. We're going to take a gander at the fresh hedge fund action encompassing Sundial Growers Inc. (NASDAQ:SNDL).
What have hedge funds been doing with Sundial Growers Inc. (NASDAQ:SNDL)?
At the end of the third quarter, a total of 8 of the hedge funds tracked by Insider Monkey were long this stock, a change of 8 from the previous quarter. On the other hand, there were a total of 0 hedge funds with a bullish position in SNDL 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.
More specifically, Moore Global Investments was the largest shareholder of Sundial Growers Inc. (NASDAQ:SNDL), with a stake worth $6.1 million reported as of the end of September. Trailing Moore Global Investments was Arrowgrass Capital Partners, which amassed a stake valued at $5.3 million. Adage Capital Management, Luminus Management, and Marshall Wace 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 Arrowgrass Capital Partners allocated the biggest weight to Sundial Growers Inc. (NASDAQ:SNDL), around 0.39% of its 13F portfolio. Moore Global Investments is also relatively very bullish on the stock, dishing out 0.25 percent of its 13F equity portfolio to SNDL.
As one would reasonably expect, specific money managers were breaking ground themselves. Moore Global Investments, managed by Louis Bacon, assembled the largest position in Sundial Growers Inc. (NASDAQ:SNDL). Moore Global Investments had $6.1 million invested in the company at the end of the quarter. Nick Niell's Arrowgrass Capital Partners also initiated a $5.3 million position during the quarter. The following funds were also among the new SNDL investors: Phill Gross and Robert Atchinson's Adage Capital Management, Jonathan Barrett and Paul Segal's Luminus Management, and Paul Marshall and Ian Wace's Marshall Wace.
Let's check out hedge fund activity in other stocks - not necessarily in the same industry as Sundial Growers Inc. (NASDAQ:SNDL) but similarly valued. These stocks are Magic Software Enterprises Ltd. (NASDAQ:MGIC), Vista Oil & Gas, S.A.B. de C.V. (NYSE:VIST), Haynes International, Inc. (NASDAQ:HAYN), and Central Puerto S.A. (NYSE:CEPU). This group of stocks' market values are closest to SNDL's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position MGIC,2,4833,-1 VIST,8,65440,8 HAYN,15,55569,5 CEPU,7,10037,-2 Average,8,33970,2.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 8 hedge funds with bullish positions and the average amount invested in these stocks was $34 million. That figure was $22 million in SNDL's case. Haynes International, Inc. (NASDAQ:HAYN) is the most popular stock in this table. On the other hand Magic Software Enterprises Ltd. (NASDAQ:MGIC) is the least popular one with only 2 bullish hedge fund positions. Sundial Growers Inc. (NASDAQ:SNDL) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we'd rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately SNDL wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); SNDL investors were disappointed as the stock returned -49.5% during the first two months of the fourth quarter 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 in Q4.
Disclosure: None. This article was originally published at Insider Monkey.
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