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Is SWIR A Good Stock To Buy Now?

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·6 min read
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After several tireless days we have finished crunching the numbers from nearly 817 13F filings issued by the elite hedge funds and other investment firms that we track at Insider Monkey, which disclosed those firms' equity portfolios as of September 30th. The results of that effort will be put on display in this article, as we share valuable insight into the smart money sentiment towards Sierra Wireless, Inc. (NASDAQ:SWIR).

Is SWIR a good stock to buy now? Sierra Wireless, Inc. (NASDAQ:SWIR) shares haven't seen a lot of action during the second quarter. Overall, hedge fund sentiment was unchanged. The stock was in 7 hedge funds' portfolios at the end of September. Our calculations also showed that SWIR isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks). At the end of this article we will also compare SWIR to other stocks including Rigel Pharmaceuticals, Inc. (NASDAQ:RIGL), Organogenesis Holdings Inc. (NASDAQ:ORGO), and Rubius Therapeutics, Inc. (NASDAQ:RUBY) to get a better sense of its popularity.

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 66 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 13% through November 17th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Didric Cederholm Lion Point Capital
Didric Cederholm Lion Point Capital

Didric Cederholm of Lion Point Capital

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 5 best cheap stocks to buy according to Ray Dalio to identify stocks with 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 let's check out the new hedge fund action surrounding Sierra Wireless, Inc. (NASDAQ:SWIR).

Hedge fund activity in Sierra Wireless, Inc. (NASDAQ:SWIR)

At the end of the third quarter, a total of 7 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in SWIR over the last 21 quarters. With hedgies' capital changing hands, there exists a select group of noteworthy hedge fund managers who were increasing their holdings substantially (or already accumulated large positions).

Is SWIR A Good Stock To Buy?
Is SWIR A Good Stock To Buy?

Among these funds, Trigran Investments held the most valuable stake in Sierra Wireless, Inc. (NASDAQ:SWIR), which was worth $57.2 million at the end of the third quarter. On the second spot was Lion Point which amassed $23.9 million worth of shares. Renaissance Technologies, Arrowstreet Capital, and Two Sigma Advisors 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 Trigran Investments allocated the biggest weight to Sierra Wireless, Inc. (NASDAQ:SWIR), around 10.36% of its 13F portfolio. Lion Point is also relatively very bullish on the stock, dishing out 5.25 percent of its 13F equity portfolio to SWIR.

We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Glaxis Capital Management. One hedge fund selling its entire position doesn't always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don't think this is the case in this case because only one of the 800+ hedge funds tracked by Insider Monkey identified as a viable investment and initiated a position in the stock (that fund was Millennium Management).

Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as Sierra Wireless, Inc. (NASDAQ:SWIR) but similarly valued. These stocks are Rigel Pharmaceuticals, Inc. (NASDAQ:RIGL), Organogenesis Holdings Inc. (NASDAQ:ORGO), Rubius Therapeutics, Inc. (NASDAQ:RUBY), Syros Pharmaceuticals, Inc. (NASDAQ:SYRS), Brightcove Inc (NASDAQ:BCOV), The Lovesac Company (NASDAQ:LOVE), and AnaptysBio, Inc. (NASDAQ:ANAB). This group of stocks' market valuations match SWIR's market valuation.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position RIGL,20,79795,2 ORGO,2,3335,-1 RUBY,10,3355,3 SYRS,13,36911,-2 BCOV,18,158080,0 LOVE,9,35135,-2 ANAB,24,241528,-2 Average,13.7,79734,-0.3 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 13.7 hedge funds with bullish positions and the average amount invested in these stocks was $80 million. That figure was $102 million in SWIR's case. AnaptysBio, Inc. (NASDAQ:ANAB) is the most popular stock in this table. On the other hand Organogenesis Holdings Inc. (NASDAQ:ORGO) is the least popular one with only 2 bullish hedge fund positions. Sierra Wireless, Inc. (NASDAQ:SWIR) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for SWIR is 31.4. 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. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 31.6% in 2020 through December 2nd and still beat the market by 16 percentage points. A small number of hedge funds were also right about betting on SWIR as the stock returned 36.4% since the end of the third quarter (through 12/2) and outperformed the market by an even larger margin.

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Disclosure: None. This article was originally published at Insider Monkey.

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