In this article we will check out the progression of hedge fund sentiment towards SVMK Inc. (NASDAQ:SVMK) and determine whether it is a good investment right now. We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also employ numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.
Is SVMK Inc. (NASDAQ:SVMK) undervalued? The smart money is turning less bullish. The number of long hedge fund positions retreated by 2 in recent months. Our calculations also showed that SVMK 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.
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 has shown that hedge funds' small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
[caption id="attachment_732403" align="aligncenter" width="399"] Christopher Kiper of Legion Partners 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 trades like this one as well as this tiny cannabis play. 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 analyze the latest hedge fund action encompassing SVMK Inc. (NASDAQ:SVMK).
How have hedgies been trading SVMK Inc. (NASDAQ:SVMK)?
At the end of the first quarter, a total of 29 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -6% from one quarter earlier. By comparison, 20 hedge funds held shares or bullish call options in SVMK a year ago. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Tiger Global Management LLC was the largest shareholder of SVMK Inc. (NASDAQ:SVMK), with a stake worth $31.1 million reported as of the end of September. Trailing Tiger Global Management LLC was Legion Partners Asset Management, which amassed a stake valued at $28.3 million. Park West Asset Management, ThornTree Capital Partners, and Royce & Associates 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 Legion Partners Asset Management allocated the biggest weight to SVMK Inc. (NASDAQ:SVMK), around 11.94% of its 13F portfolio. ThornTree Capital Partners is also relatively very bullish on the stock, dishing out 7.11 percent of its 13F equity portfolio to SVMK.
Because SVMK Inc. (NASDAQ:SVMK) has witnessed falling interest from hedge fund managers, it's easy to see that there is a sect of funds who were dropping their full holdings last quarter. It's worth mentioning that Zachary Miller's Parian Global Management dropped the biggest stake of all the hedgies monitored by Insider Monkey, comprising about $10.7 million in stock, and Pasco Alfaro / Richard Tumure's Miura Global Management was right behind this move, as the fund sold off about $9.7 million worth. These moves are interesting, as aggregate hedge fund interest was cut by 2 funds last quarter.
Let's now review hedge fund activity in other stocks - not necessarily in the same industry as SVMK Inc. (NASDAQ:SVMK) but similarly valued. We will take a look at Greif, Inc. (NYSE:GEF), Prestige Consumer Healthcare Inc. (NYSE:PBH), Denali Therapeutics Inc. (NASDAQ:DNLI), and Cathay General Bancorp (NASDAQ:CATY). This group of stocks' market values are similar to SVMK's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position GEF,17,64067,-1 PBH,17,86125,3 DNLI,14,70980,5 CATY,15,21855,1 Average,15.75,60757,2 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 15.75 hedge funds with bullish positions and the average amount invested in these stocks was $61 million. That figure was $212 million in SVMK's case. Greif, Inc. (NYSE:GEF) is the most popular stock in this table. On the other hand Denali Therapeutics Inc. (NASDAQ:DNLI) is the least popular one with only 14 bullish hedge fund positions. Compared to these stocks SVMK Inc. (NASDAQ:SVMK) is more popular among hedge funds. 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 returned 8.3% in 2020 through the end of May but still managed to beat the market by 13.2 percentage points. Hedge funds were also right about betting on SVMK as the stock returned 49.1% so far in Q2 (through the end of May) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.
Disclosure: None. This article was originally published at Insider Monkey.