At Insider Monkey we track the activity of some of the best-performing hedge funds like Appaloosa Management, Baupost, and Tiger Global because we determined that some of the stocks that they are collectively bullish on can help us generate returns above the broader indices. Out of thousands of stocks that hedge funds invest in, small-caps can provide the best returns over the long term due to the fact that these companies are less efficiently priced and are usually under the radars of mass-media, analysts and dumb money. This is why we follow the smart money moves in the small-cap space.
Solaredge Technologies Inc (NASDAQ:SEDG) shares haven't seen a lot of action during the third quarter. Overall, hedge fund sentiment was unchanged. The stock was in 14 hedge funds' portfolios at the end of the fourth quarter of 2018. At the end of this article we will also compare SEDG to other stocks including Cohen & Steers, Inc. (NYSE:CNS), Avaya Holdings Corp. (NYSE:AVYA), and Sibanye Gold Ltd (NYSE:SBGL) to get a better sense of its popularity.
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 look at the fresh hedge fund action encompassing Solaredge Technologies Inc (NASDAQ:SEDG).
How have hedgies been trading Solaredge Technologies Inc (NASDAQ:SEDG)?
At the end of the fourth quarter, a total of 14 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from one quarter earlier. By comparison, 18 hedge funds held shares or bullish call options in SEDG a year ago. With hedgies' sentiment swirling, there exists an "upper tier" of noteworthy hedge fund managers who were increasing their stakes substantially (or already accumulated large positions).
The largest stake in Solaredge Technologies Inc (NASDAQ:SEDG) was held by Renaissance Technologies, which reported holding $15 million worth of stock at the end of December. It was followed by Bloom Tree Partners with a $12.3 million position. Other investors bullish on the company included Citadel Investment Group, Two Sigma Advisors, and OZ Management.
Since Solaredge Technologies Inc (NASDAQ:SEDG) has faced declining sentiment from the smart money, it's safe to say that there is a sect of funds that elected to cut their entire stakes last quarter. Interestingly, Richard Mashaal's Rima Senvest Management dropped the largest stake of the "upper crust" of funds monitored by Insider Monkey, comprising about $12.1 million in call options, and Dmitry Balyasny's Balyasny Asset Management was right behind this move, as the fund dropped about $6.2 million worth. These transactions are interesting, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Solaredge Technologies Inc (NASDAQ:SEDG) but similarly valued. We will take a look at Cohen & Steers, Inc. (NYSE:CNS), Avaya Holdings Corp. (NYSE:AVYA), Sibanye Gold Ltd (NYSE:SBGL), and Forward Air Corporation (NASDAQ:FWRD). All of these stocks' market caps are similar to SEDG's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CNS,8,47029,-1 AVYA,36,353504,2 SBGL,12,37299,0 FWRD,11,69939,-4 Average,16.75,126943,-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 $127 million. That figure was $51 million in SEDG's case. Avaya Holdings Corp. (NYSE:AVYA) is the most popular stock in this table. On the other hand Cohen & Steers, Inc. (NYSE:CNS) is the least popular one with only 8 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 calculations showed that top 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. A small number of hedge funds were also right about betting on SEDG, though not to the same extent, as the stock returned 23.1% and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.