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Before we spend countless hours researching a company, we like to analyze what insiders, hedge funds and billionaire investors think of the stock first. This is a necessary first step in our investment process because our research has shown that the elite investors' consensus returns have been exceptional. In the following paragraphs, we find out what the billionaire investors and hedge funds think of Solaredge Technologies Inc (NASDAQ:SEDG).
Is SEDG stock a buy or sell? Solaredge Technologies Inc (NASDAQ:SEDG) shareholders have witnessed a decrease in hedge fund sentiment recently. Solaredge Technologies Inc (NASDAQ:SEDG) was in 28 hedge funds' portfolios at the end of the fourth quarter of 2020. The all time high for this statistic is 31. Our calculations also showed that SEDG isn't among the 30 most popular stocks among hedge funds (click for Q4 rankings).
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 124 percentage points since March 2017 (see the details here).
Clint Carlson of Carlson Capital
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, auto parts business is a recession resistant business, so we are taking a closer look at this discount auto parts stock that is growing at a 196% annualized rate. We go through lists like the 15 best micro-cap stocks to buy now to identify the next stock with 10x upside potential. 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. With all of this in mind we're going to take a peek at the key hedge fund action encompassing Solaredge Technologies Inc (NASDAQ:SEDG).
Do Hedge Funds Think SEDG Is A Good Stock To Buy Now?
Heading into the first quarter of 2021, a total of 28 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -10% from the previous quarter. By comparison, 28 hedge funds held shares or bullish call options in SEDG a year ago. With hedgies' sentiment swirling, there exists an "upper tier" of notable hedge fund managers who were increasing their holdings considerably (or already accumulated large positions).
The largest stake in Solaredge Technologies Inc (NASDAQ:SEDG) was held by Impax Asset Management, which reported holding $141.1 million worth of stock at the end of December. It was followed by Polar Capital with a $54 million position. Other investors bullish on the company included Montanaro Asset Management, Citadel Investment Group, and D E Shaw. In terms of the portfolio weights assigned to each position Montanaro Asset Management allocated the biggest weight to Solaredge Technologies Inc (NASDAQ:SEDG), around 8.48% of its 13F portfolio. Quaero Capital is also relatively very bullish on the stock, dishing out 5.09 percent of its 13F equity portfolio to SEDG.
Seeing as Solaredge Technologies Inc (NASDAQ:SEDG) has experienced a decline in interest from the entirety of the hedge funds we track, logic holds that there is a sect of fund managers who sold off their positions entirely heading into Q1. It's worth mentioning that Renaissance Technologies sold off the biggest position of all the hedgies watched by Insider Monkey, comprising an estimated $60.6 million in stock. Peter Rathjens, Bruce Clarke and John Campbell's fund, Arrowstreet Capital, also dropped its stock, about $38 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest dropped by 3 funds heading into Q1.
Let's go over hedge fund activity in other stocks similar to Solaredge Technologies Inc (NASDAQ:SEDG). These stocks are M&T Bank Corporation (NYSE:MTB), Nomura Holdings, Inc. (NYSE:NMR), Avantor, Inc. (NYSE:AVTR), Healthpeak Properties, Inc. (NYSE:PEAK), Hess Corporation (NYSE:HES), Ulta Beauty, Inc. (NASDAQ:ULTA), and Steris Plc (NYSE:STE). All of these stocks' market caps are closest to SEDG's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position MTB,33,382587,-2 NMR,6,17627,0 AVTR,56,2218872,0 PEAK,22,262480,0 HES,33,366330,-2 ULTA,43,1340650,12 STE,36,784186,6 Average,32.7,767533,2 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 32.7 hedge funds with bullish positions and the average amount invested in these stocks was $768 million. That figure was $459 million in SEDG's case. Avantor, Inc. (NYSE:AVTR) is the most popular stock in this table. On the other hand Nomura Holdings, Inc. (NYSE:NMR) is the least popular one with only 6 bullish hedge fund positions. Solaredge Technologies Inc (NASDAQ:SEDG) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for SEDG is 51.1. 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 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks gained 12.3% in 2021 through April 19th and surpassed the market again by 0.9 percentage points. Unfortunately SEDG wasn't nearly as popular as these 30 stocks (hedge fund sentiment was quite bearish); SEDG investors were disappointed as the stock returned -23.3% since the end of December (through 4/19) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 30 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.