It is already common knowledge that individual investors do not usually have the necessary resources and abilities to properly research an investment opportunity. As a result, most investors pick their illusory “winners” by making a superficial analysis and research that leads to poor performance on aggregate. Since stock returns aren't usually symmetrically distributed and index returns are more affected by a few outlier stocks (i.e. the FAANG stocks dominating and driving S&P 500 Index's returns in recent years), more than 50% of the constituents of the Standard and Poor’s 500 Index underperform the benchmark. Hence, if you randomly pick a stock, there is more than 50% chance that you'd fail to beat the market. At the same time, the 15 most favored S&P 500 stocks by the hedge funds monitored by Insider Monkey generated a return of 19.7% during the first 2.5 months of 2019 (vs. 13.1% gain for SPY), with 93% of these stocks outperforming the benchmark. Of course, hedge funds do make wrong bets on some occasions and these get disproportionately publicized on financial media, but piggybacking their moves can beat the broader market on average. That's why we are going to go over recent hedge fund activity in Sogou Inc. (NYSE:SOGO).
Hedge fund interest in Sogou Inc. (NYSE:SOGO) shares was flat at the end of last quarter. This is usually a negative indicator. The level and the change in hedge fund popularity aren't the only variables you need to analyze to decipher hedge funds' perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That's why at the end of this article we will examine companies such as Colliers International Group Inc (NASDAQ:CIGI), Antero Midstream Corporation (NYSE:AMGP), and Terreno Realty Corporation (NYSE:TRNO) to gather more data points.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey's flagship best performing hedge funds strategy returned 20.7% year to date (through March 12th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 32 percentage points since its inception (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
We're going to take a gander at the new hedge fund action encompassing Sogou Inc. (NYSE:SOGO).
How are hedge funds trading Sogou Inc. (NYSE:SOGO)?
At the end of the fourth quarter, a total of 6 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the previous quarter. On the other hand, there were a total of 6 hedge funds with a bullish position in SOGO a year ago. With the smart money's sentiment swirling, there exists a few notable hedge fund managers who were upping their stakes meaningfully (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, holds the most valuable position in Sogou Inc. (NYSE:SOGO). Arrowstreet Capital has a $4.8 million position in the stock, comprising less than 0.1%% of its 13F portfolio. Sitting at the No. 2 spot is Citadel Investment Group, led by Ken Griffin, holding a $1.9 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Remaining professional money managers that are bullish encompass Daniel S. Och's OZ Management, Chase Coleman's Tiger Global Management LLC and Minhua Zhang's Weld Capital Management.
Since Sogou Inc. (NYSE:SOGO) has witnessed declining sentiment from the smart money, it's safe to say that there exists a select few money managers who were dropping their positions entirely last quarter. It's worth mentioning that David Kowitz and Sheldon Kasowitz's Indus Capital said goodbye to the biggest stake of the "upper crust" of funds monitored by Insider Monkey, valued at close to $0.8 million in call options, and Matthew Hulsizer's PEAK6 Capital Management was right behind this move, as the fund dropped about $0.2 million worth. These transactions are interesting, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).
Let's also examine hedge fund activity in other stocks similar to Sogou Inc. (NYSE:SOGO). These stocks are Colliers International Group Inc (NASDAQ:CIGI), Antero Midstream Corporation (NYSE:AMGP), Terreno Realty Corporation (NYSE:TRNO), and MGE Energy, Inc. (NASDAQ:MGEE). This group of stocks' market caps match SOGO's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CIGI,13,540066,2 AMGP,15,168765,-2 TRNO,10,29454,-2 MGEE,12,33681,4 Average,12.5,192992,0.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 12.5 hedge funds with bullish positions and the average amount invested in these stocks was $193 million. That figure was $10 million in SOGO's case. Antero Midstream Corporation (NYSE:AMGP) is the most popular stock in this table. On the other hand Terreno Realty Corporation (NYSE:TRNO) is the least popular one with only 10 bullish hedge fund positions. Compared to these stocks Sogou Inc. (NYSE:SOGO) is even less popular than TRNO. Hedge funds dodged a bullet by taking a bearish stance towards SOGO. Our calculations showed that the top 15 most popular hedge fund stocks returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. Unfortunately SOGO wasn't nearly as popular as these 15 stock (hedge fund sentiment was very bearish); SOGO investors were disappointed as the stock returned 3% and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 15 most popular stocks) among hedge funds as 13 of these stocks already outperformed the market this year.
Disclosure: None. This article was originally published at Insider Monkey.