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Here is What Hedge Funds Think About Sequans Communications SA (SQNS)

Abigail Fisher
·6 min read

The 800+ hedge funds and famous money managers tracked by Insider Monkey have already compiled and submitted their 13F filings for the third quarter, which unveil their equity positions as of September 30. We went through these filings, fixed typos and other more significant errors and identified the changes in hedge fund portfolios. Our extensive review of these public filings is finally over, so this article is set to reveal the smart money sentiment towards Sequans Communications SA (NYSE:SQNS).

Hedge fund interest in Sequans Communications SA (NYSE:SQNS) shares was flat at the end of last quarter. This is usually a negative indicator. Our calculations also showed that SQNS isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks). At the end of this article we will also compare SQNS to other stocks including Altus Midstream Company (NASDAQ:ALTM), Professional Holding Corp. (NASDAQ:PFHD), and Eagle Bulk Shipping Inc. (NASDAQ:EGLE) to get a better sense of its popularity. Video: Watch our video about the top 5 most popular hedge fund stocks.

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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 66 percentage points since March 2017 (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 13% through November 17th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Millennium Management, Catapult Capital Management
Millennium Management, Catapult Capital Management

Israel Englander of Millennium Management

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. Now let's review the key hedge fund action encompassing Sequans Communications SA (NYSE:SQNS).

How have hedgies been trading Sequans Communications SA (NYSE:SQNS)?

At the end of September, a total of 5 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from one quarter earlier. On the other hand, there were a total of 4 hedge funds with a bullish position in SQNS a year ago. With hedge funds' positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were upping their stakes substantially (or already accumulated large positions).

According to Insider Monkey's hedge fund database, Divisar Capital, managed by Steven Baughman, holds the most valuable position in Sequans Communications SA (NYSE:SQNS). Divisar Capital has a $12.4 million position in the stock, comprising 4.1% of its 13F portfolio. Coming in second is Brett Hendrickson of Nokomis Capital, with a $5.9 million position; 2.7% of its 13F portfolio is allocated to the stock. Other hedge funds and institutional investors that are bullish consist of Jonathan Guo's Yiheng Capital, Israel Englander's Millennium Management and Frank Slattery's Symmetry Peak Management. In terms of the portfolio weights assigned to each position Divisar Capital allocated the biggest weight to Sequans Communications SA (NYSE:SQNS), around 4.11% of its 13F portfolio. Nokomis Capital is also relatively very bullish on the stock, designating 2.72 percent of its 13F equity portfolio to SQNS.

We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Pentwater Capital Management. One hedge fund selling its entire position doesn't always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don't think this is the case in this case because only one of the 800+ hedge funds tracked by Insider Monkey identified as a viable investment and initiated a position in the stock (that fund was Symmetry Peak Management).

Let's now review hedge fund activity in other stocks - not necessarily in the same industry as Sequans Communications SA (NYSE:SQNS) but similarly valued. These stocks are Altus Midstream Company (NASDAQ:ALTM), Professional Holding Corp. (NASDAQ:PFHD), Eagle Bulk Shipping Inc. (NASDAQ:EGLE), Unity Biotechnology, Inc. (NASDAQ:UBX), Moneygram International Inc (NYSE:MGI), Tilly's Inc (NYSE:TLYS), and OptiNose, Inc. (NASDAQ:OPTN). This group of stocks' market caps are closest to SQNS's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position ALTM,2,1021,-4 PFHD,3,7982,-1 EGLE,3,71453,-4 UBX,5,1840,-2 MGI,9,16462,1 TLYS,14,26711,-1 OPTN,11,22447,2 Average,6.7,21131,-1.3 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 6.7 hedge funds with bullish positions and the average amount invested in these stocks was $21 million. That figure was $22 million in SQNS's case. Tilly's Inc (NYSE:TLYS) is the most popular stock in this table. On the other hand Altus Midstream Company (NASDAQ:ALTM) is the least popular one with only 2 bullish hedge fund positions. Sequans Communications SA (NYSE:SQNS) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for SQNS is 38.9. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. 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 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 30.7% in 2020 through November 27th and surpassed the market again by 16.1 percentage points. Unfortunately SQNS wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); SQNS investors were disappointed as the stock returned -24.6% since the end of September (through 11/27) 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 most of these stocks already outperformed the market in 2020.

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Disclosure: None. This article was originally published at Insider Monkey.

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