At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (see why hell is coming). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards Simulations Plus, Inc. (NASDAQ:SLP) at the end of the first quarter and determine whether the smart money was really smart about this stock.
Simulations Plus, Inc. (NASDAQ:SLP) has experienced a decrease in hedge fund interest recently. SLP was in 10 hedge funds' portfolios at the end of March. There were 12 hedge funds in our database with SLP holdings at the end of the previous quarter. Our calculations also showed that SLP isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks). Video: Watch our video about the top 5 most popular hedge fund stocks.
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[caption id="attachment_738761" align="aligncenter" width="400"] Fred DiSanto of Ancora Advisors[/caption]
At Insider Monkey we scour multiple sources to uncover the next great investment idea. There is a lot of volatility in the markets and this presents amazing investment opportunities from time to time. For example, this trader claims to deliver juiced up returns with one trade a week, so we are checking out his highest conviction idea. A second trader claims to score lucrative profits by utilizing a "weekend trading strategy", so we look into his strategy's picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We recently recommended several stocks partly inspired by legendary Bill Miller's investor letter. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. Now let's take a look at the fresh hedge fund action encompassing Simulations Plus, Inc. (NASDAQ:SLP).
What have hedge funds been doing with Simulations Plus, Inc. (NASDAQ:SLP)?
At Q1's end, a total of 10 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -17% from one quarter earlier. On the other hand, there were a total of 6 hedge funds with a bullish position in SLP a year ago. With hedge funds' positions undergoing their usual ebb and flow, there exists a select group of noteworthy hedge fund managers who were upping their holdings meaningfully (or already accumulated large positions).
The largest stake in Simulations Plus, Inc. (NASDAQ:SLP) was held by Royce & Associates, which reported holding $16.6 million worth of stock at the end of September. It was followed by Renaissance Technologies with a $12.3 million position. Other investors bullish on the company included Winton Capital Management, Ancora Advisors, and Algert Coldiron Investors. In terms of the portfolio weights assigned to each position Zebra Capital Management allocated the biggest weight to Simulations Plus, Inc. (NASDAQ:SLP), around 0.65% of its 13F portfolio. Algert Coldiron Investors is also relatively very bullish on the stock, earmarking 0.53 percent of its 13F equity portfolio to SLP.
Judging by the fact that Simulations Plus, Inc. (NASDAQ:SLP) has witnessed declining sentiment from hedge fund managers, it's safe to say that there was a specific group of fund managers that decided to sell off their positions entirely heading into Q4. It's worth mentioning that Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital sold off the biggest stake of the "upper crust" of funds tracked by Insider Monkey, totaling close to $2.3 million in stock, and Donald Sussman's Paloma Partners was right behind this move, as the fund dumped about $0.3 million worth. These transactions are interesting, as aggregate hedge fund interest dropped by 2 funds heading into Q4.
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Simulations Plus, Inc. (NASDAQ:SLP) but similarly valued. These stocks are Intellia Therapeutics, Inc. (NASDAQ:NTLA), Franklin Street Properties Corp. (NYSE:FSP), National Western Life Group Inc. (NASDAQ:NWLI), and MSG Networks Inc (NYSE:MSGN). This group of stocks' market values resemble SLP's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position NTLA,10,24877,-3 FSP,5,30676,-2 NWLI,7,10224,1 MSGN,24,179071,-4 Average,11.5,61212,-2 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 11.5 hedge funds with bullish positions and the average amount invested in these stocks was $61 million. That figure was $36 million in SLP's case. MSG Networks Inc (NYSE:MSGN) is the most popular stock in this table. On the other hand Franklin Street Properties Corp. (NYSE:FSP) is the least popular one with only 5 bullish hedge fund positions. Simulations Plus, Inc. (NASDAQ:SLP) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 12.3% in 2020 through June 30th and still beat the market by 15.5 percentage points. A small number of hedge funds were also right about betting on SLP as the stock returned 71.6% during the second quarter and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.