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 (Recession is Imminent: We Need A Travel Ban NOW). 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 Sogou Inc. (NYSE:SOGO).
Is Sogou Inc. (NYSE:SOGO) worth your attention right now? Hedge funds are in a bearish mood. The number of bullish hedge fund positions retreated by 5 in recent months. Our calculations also showed that SOGO 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). SOGO was in 6 hedge funds' portfolios at the end of the first quarter of 2020. There were 11 hedge funds in our database with SOGO holdings at the end of the previous quarter. 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 58 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 36% through May 18th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
[caption id="attachment_256989" align="aligncenter" width="395"] Dmitry Balyasny of Balyasny Asset Management[/caption]
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out stocks recommended/scorned by legendary Bill Miller. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind let's review the latest hedge fund action surrounding Sogou Inc. (NYSE:SOGO).
How are hedge funds trading Sogou Inc. (NYSE:SOGO)?
Heading into the second quarter of 2020, a total of 6 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -45% from the fourth quarter of 2019. On the other hand, there were a total of 8 hedge funds with a bullish position in SOGO a year ago. With hedgies' capital changing hands, there exists a few noteworthy hedge fund managers who were increasing their holdings meaningfully (or already accumulated large positions).
Among these funds, Renaissance Technologies held the most valuable stake in Sogou Inc. (NYSE:SOGO), which was worth $7.3 million at the end of the third quarter. On the second spot was Arrowstreet Capital which amassed $1.1 million worth of shares. Millennium Management, Two Sigma Advisors, and Citadel Investment Group were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Renaissance Technologies allocated the biggest weight to Sogou Inc. (NYSE:SOGO), around 0.01% of its 13F portfolio. Arrowstreet Capital is also relatively very bullish on the stock, designating 0.003 percent of its 13F equity portfolio to SOGO.
Due to the fact that Sogou Inc. (NYSE:SOGO) has witnessed declining sentiment from the entirety of the hedge funds we track, logic holds that there is a sect of funds who were dropping their positions entirely by the end of the first quarter. At the top of the heap, D. E. Shaw's D E Shaw said goodbye to the biggest stake of all the hedgies watched by Insider Monkey, totaling close to $0.8 million in stock, and Minhua Zhang's Weld Capital Management was right behind this move, as the fund cut about $0.5 million worth. These transactions are important to note, as aggregate hedge fund interest was cut by 5 funds by the end of the first quarter.
Let's now take a look at hedge fund activity in other stocks similar to Sogou Inc. (NYSE:SOGO). We will take a look at Cavco Industries, Inc. (NASDAQ:CVCO), Edgewell Personal Care Company (NYSE:EPC), BioTelemetry, Inc. (NASDAQ:BEAT), and Office Properties Income Trust (NASDAQ:OPI). This group of stocks' market valuations match SOGO's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CVCO,20,122025,0 EPC,25,176671,-1 BEAT,12,42629,-3 OPI,10,20479,1 Average,16.75,90451,-0.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 16.75 hedge funds with bullish positions and the average amount invested in these stocks was $90 million. That figure was $10 million in SOGO's case. Edgewell Personal Care Company (NYSE:EPC) is the most popular stock in this table. On the other hand Office Properties Income Trust (NASDAQ:OPI) 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 OPI. Hedge funds dodged a bullet by taking a bearish stance towards SOGO. Our calculations showed that the top 10 most popular hedge fund stocks returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 13.9% in 2020 through June 10th but managed to beat the market by 14.2 percentage points. Unfortunately SOGO wasn't nearly as popular as these 10 stocks (hedge fund sentiment was very bearish); SOGO investors were disappointed as the stock returned 7.4% during the second quarter (through June 10th) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market so far in 2020.
Disclosure: None. This article was originally published at Insider Monkey.