We know that hedge funds generate strong, risk-adjusted returns over the long run, therefore imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, smart money investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn't mean that they don't have occasional colossal losses; they do (like Peltz's recent General Electric losses). However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, as the current round of 13F filings has just ended, let’s examine the smart money sentiment towards Sanmina Corporation (NASDAQ:SANM).
Sanmina Corporation (NASDAQ:SANM) was in 15 hedge funds' portfolios at the end of the fourth quarter of 2018. SANM has seen an increase in hedge fund sentiment recently. There were 13 hedge funds in our database with SANM positions at the end of the previous quarter. Our calculations also showed that sanm 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 32 percentage points since May 2014 through March 12, 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.
We're going to take a peek at the new hedge fund action surrounding Sanmina Corporation (NASDAQ:SANM).
How have hedgies been trading Sanmina Corporation (NASDAQ:SANM)?
Heading into the first quarter of 2019, a total of 15 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 15% from the previous quarter. By comparison, 18 hedge funds held shares or bullish call options in SANM a year ago. With hedgies' positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were boosting their holdings meaningfully (or already accumulated large positions).
The largest stake in Sanmina Corporation (NASDAQ:SANM) was held by Diamond Hill Capital, which reported holding $73.9 million worth of stock at the end of December. It was followed by D E Shaw with a $23.3 million position. Other investors bullish on the company included Royce & Associates, Renaissance Technologies, and Alyeska Investment Group.
As one would reasonably expect, some big names have jumped into Sanmina Corporation (NASDAQ:SANM) headfirst. Alyeska Investment Group, managed by Anand Parekh, initiated the most outsized position in Sanmina Corporation (NASDAQ:SANM). Alyeska Investment Group had $10.1 million invested in the company at the end of the quarter. Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital also initiated a $6.8 million position during the quarter. The other funds with new positions in the stock are Joel Greenblatt's Gotham Asset Management, Hoon Kim's Quantinno Capital, and Andrew Feldstein and Stephen Siderow's Blue Mountain Capital.
Let's check out hedge fund activity in other stocks - not necessarily in the same industry as Sanmina Corporation (NASDAQ:SANM) but similarly valued. We will take a look at NetGear, Inc. (NASDAQ:NTGR), Aerie Pharmaceuticals Inc (NASDAQ:AERI), Arcos Dorados Holding Inc (NYSE:ARCO), and Scientific Games Corp (NASDAQ:SGMS). This group of stocks' market valuations are similar to SANM's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position NTGR,14,56299,-2 AERI,23,628236,0 ARCO,14,155551,-4 SGMS,26,549206,1 Average,19.25,347323,-1.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 19.25 hedge funds with bullish positions and the average amount invested in these stocks was $347 million. That figure was $159 million in SANM's case. Scientific Games Corp (NASDAQ:SGMS) is the most popular stock in this table. On the other hand NetGear, Inc. (NASDAQ:NTGR) is the least popular one with only 14 bullish hedge fund positions. Sanmina Corporation (NASDAQ:SANM) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. A small number of hedge funds were also right about betting on SANM as the stock returned 30.8% and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.