There are several ways to beat the market, and investing in small cap stocks has historically been one of them. We like to improve the odds of beating the market further by examining what famous hedge fund operators such as Jeff Ubben, George Soros and Carl Icahn think. Those hedge fund operators make billions of dollars each year by hiring the best and the brightest to do research on stocks, including small cap stocks that big brokerage houses simply don't cover. Because of Carl Icahn and other elite funds' exemplary historical records, we pay attention to their small cap picks. In this article, we use hedge fund filing data to analyze Sangamo Therapeutics, Inc. (NASDAQ:SGMO).
Sangamo Therapeutics, Inc. (NASDAQ:SGMO) was in 19 hedge funds' portfolios at the end of the first quarter of 2019. SGMO has experienced a decrease in enthusiasm from smart money of late. There were 23 hedge funds in our database with SGMO positions at the end of the previous quarter. Our calculations also showed that sgmo isn't among the 30 most popular stocks among hedge funds.
Hedge funds' reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn't keep up with the unhedged returns of the market indices. Our research has shown that hedge funds' small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
Let's view the fresh hedge fund action surrounding Sangamo Therapeutics, Inc. (NASDAQ:SGMO).
What have hedge funds been doing with Sangamo Therapeutics, Inc. (NASDAQ:SGMO)?
At the end of the first quarter, a total of 19 of the hedge funds tracked by Insider Monkey were long this stock, a change of -17% from the fourth quarter of 2018. On the other hand, there were a total of 21 hedge funds with a bullish position in SGMO a year ago. With hedgies' capital changing hands, there exists a select group of noteworthy hedge fund managers who were increasing their stakes substantially (or already accumulated large positions).
Among these funds, Casdin Capital held the most valuable stake in Sangamo Therapeutics, Inc. (NASDAQ:SGMO), which was worth $10.3 million at the end of the first quarter. On the second spot was Baker Bros. Advisors which amassed $9.5 million worth of shares. Moreover, Renaissance Technologies, Citadel Investment Group, and Citadel Investment Group were also bullish on Sangamo Therapeutics, Inc. (NASDAQ:SGMO), allocating a large percentage of their portfolios to this stock.
Because Sangamo Therapeutics, Inc. (NASDAQ:SGMO) has faced declining sentiment from the entirety of the hedge funds we track, it's easy to see that there was a specific group of hedge funds who were dropping their positions entirely in the third quarter. Intriguingly, Oleg Nodelman's EcoR1 Capital sold off the largest stake of all the hedgies tracked by Insider Monkey, comprising close to $13.6 million in stock. Phill Gross and Robert Atchinson's fund, Adage Capital Management, also said goodbye to its stock, about $10.9 million worth. These bearish behaviors are interesting, as total hedge fund interest fell by 4 funds in the third quarter.
Let's go over hedge fund activity in other stocks similar to Sangamo Therapeutics, Inc. (NASDAQ:SGMO). We will take a look at MTS Systems Corporation (NASDAQ:MTSC), Vocera Communications Inc (NYSE:VCRA), Marten Transport, Ltd (NASDAQ:MRTN), and W&T Offshore, Inc. (NYSE:WTI). All of these stocks' market caps match SGMO's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position MTSC,10,126200,-2 VCRA,17,72803,0 MRTN,17,48530,0 WTI,24,113104,3 Average,17,90159,0.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 17 hedge funds with bullish positions and the average amount invested in these stocks was $90 million. That figure was $42 million in SGMO's case. W&T Offshore, Inc. (NYSE:WTI) is the most popular stock in this table. On the other hand MTS Systems Corporation (NASDAQ:MTSC) is the least popular one with only 10 bullish hedge fund positions. Sangamo Therapeutics, Inc. (NASDAQ:SGMO) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 20 most popular stocks among hedge funds returned 1.9% in Q2 through May 30th and outperformed the S&P 500 ETF (SPY) by more than 3 percentage points. Hedge funds were also right about betting on SGMO, though not to the same extent, as the stock returned -0.9% during the same time frame and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.