Amid an overall bull market, many stocks that smart money investors were collectively bullish on surged through October 17th. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 45% and 39% respectively. Our research shows that most of the stocks that smart money likes historically generate strong risk-adjusted returns. That's why we weren't surprised when hedge funds’ top 20 large-cap stock picks generated a return of 24.4% during the first 9 months of 2019 and outperformed the broader market benchmark by 4 percentage points.This is why following the smart money sentiment is a useful tool at identifying the next stock to invest in.
Is SailPoint Technologies Holdings, Inc. (NYSE:SAIL) undervalued? Hedge funds are in a bearish mood. The number of bullish hedge fund positions were cut by 5 recently. Our calculations also showed that SAIL isn't among the 30 most popular stocks among hedge funds (see the video below). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
To most investors, hedge funds are viewed as worthless, old investment vehicles of years past. While there are greater than 8000 funds with their doors open at present, Our researchers hone in on the bigwigs of this club, around 750 funds. These hedge fund managers handle bulk of the smart money's total capital, and by observing their inimitable investments, Insider Monkey has unsheathed various investment strategies that have historically outpaced the S&P 500 index. Insider Monkey's flagship hedge fund strategy surpassed the S&P 500 index by around 5 percentage points per year since its inception in May 2014. We were able to generate large returns even by identifying short candidates. Our portfolio of short stocks lost 25.7% since February 2017 (through September 30th) even though the market was up more than 33% during the same period. We just shared a list of 10 short targets in our latest quarterly update .
Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn't rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. Let's take a peek at the latest hedge fund action regarding SailPoint Technologies Holdings, Inc. (NYSE:SAIL).
What does smart money think about SailPoint Technologies Holdings, Inc. (NYSE:SAIL)?
At Q2's end, a total of 22 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -19% from the previous quarter. On the other hand, there were a total of 15 hedge funds with a bullish position in SAIL 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.
Of the funds tracked by Insider Monkey, SoMa Equity Partners, managed by Gil Simon, holds the largest position in SailPoint Technologies Holdings, Inc. (NYSE:SAIL). SoMa Equity Partners has a $62.1 million position in the stock, comprising 4.7% of its 13F portfolio. The second largest stake is held by Jericho Capital Asset Management, led by Josh Resnick, holding a $49.1 million position; the fund has 2.2% of its 13F portfolio invested in the stock. Some other professional money managers with similar optimism contain Steve Cohen's Point72 Asset Management, Ken Griffin's Citadel Investment Group and David Rosen's Rubric Capital Management.
Seeing as SailPoint Technologies Holdings, Inc. (NYSE:SAIL) has faced falling interest from the smart money, logic holds that there lies a certain "tier" of funds who sold off their entire stakes by the end of the second quarter. It's worth mentioning that Andrew Sandler's Sandler Capital Management cut the biggest investment of all the hedgies followed by Insider Monkey, valued at an estimated $17.6 million in stock. Zach Schreiber's fund, Point State Capital, also said goodbye to its stock, about $6.2 million worth. These bearish behaviors are important to note, as total hedge fund interest fell by 5 funds by the end of the second quarter.
Let's check out hedge fund activity in other stocks similar to SailPoint Technologies Holdings, Inc. (NYSE:SAIL). These stocks are WillScot Corporation (NASDAQ:WSC), Zuora, Inc. (NYSE:ZUO), Magellan Health Inc (NASDAQ:MGLN), and Pacira BioSciences, Inc. (NASDAQ:PCRX). This group of stocks' market valuations are closest to SAIL's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position WSC,23,186226,1 ZUO,19,190779,-2 MGLN,19,379621,-2 PCRX,28,582687,1 Average,22.25,334828,-0.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 22.25 hedge funds with bullish positions and the average amount invested in these stocks was $335 million. That figure was $291 million in SAIL's case. Pacira BioSciences, Inc. (NASDAQ:PCRX) is the most popular stock in this table. On the other hand Zuora, Inc. (NYSE:ZUO) is the least popular one with only 19 bullish hedge fund positions. SailPoint Technologies Holdings, Inc. (NYSE:SAIL) 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 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately SAIL wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); SAIL investors were disappointed as the stock returned -6.7% during the third 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 many of these stocks already outperformed the market so far in 2019.
Disclosure: None. This article was originally published at Insider Monkey.