In this article we will check out the progression of hedge fund sentiment towards SLR Senior Investment Corp. (NASDAQ:SUNS) 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 SUNS a good stock to buy? Hedge fund interest in SLR Senior Investment Corp. (NASDAQ:SUNS) shares was flat at the end of last quarter. This is usually a negative indicator. Our calculations also showed that SUNS isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings). The level and the change in hedge fund popularity aren't the only variables you need to analyze to decipher hedge funds' perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That's why at the end of this article we will examine companies such as Franklin Wireless Corp. (NASDAQ:FKWL), HireQuest, Inc. (NASDAQ:HQI), and LG Display Co Ltd. (NYSE:LPL) to gather more data points.
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 115 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.
Israel Englander of Millennium Management
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, an activist hedge fund wants to buy this $28 biotech stock for $50. So, we recommended a long position to our monthly premium newsletter subscribers. We go through lists like the 10 best battery stocks to pick the next Tesla that will deliver a 10x return. 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 homepage. Now let's take a look at the fresh hedge fund action encompassing SLR Senior Investment Corp. (NASDAQ:SUNS).
Do Hedge Funds Think SUNS Is A Good Stock To Buy Now?
At first quarter's end, a total of 3 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the fourth quarter of 2020. On the other hand, there were a total of 3 hedge funds with a bullish position in SUNS a year ago. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Two Sigma Advisors was the largest shareholder of SLR Senior Investment Corp. (NASDAQ:SUNS), with a stake worth $1.5 million reported as of the end of March. Trailing Two Sigma Advisors was Citadel Investment Group, which amassed a stake valued at $0.4 million. Millennium Management was 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 Two Sigma Advisors allocated the biggest weight to SLR Senior Investment Corp. (NASDAQ:SUNS), around 0.004% of its 13F portfolio. Millennium Management is also relatively very bullish on the stock, designating 0.0003 percent of its 13F equity portfolio to SUNS.
Earlier we told you that the aggregate hedge fund interest in the stock was unchanged and we view this as a negative development. Even though there weren't any hedge funds dumping their holdings during the third quarter, there weren't any hedge funds initiating brand new positions. This indicates that hedge funds, at the very best, perceive this stock as dead money and they haven't identified any viable catalysts that can attract investor attention.
Let's check out hedge fund activity in other stocks similar to SLR Senior Investment Corp. (NASDAQ:SUNS). These stocks are Franklin Wireless Corp. (NASDAQ:FKWL), HireQuest, Inc. (NASDAQ:HQI), LG Display Co Ltd. (NYSE:LPL), KVH Industries, Inc. (NASDAQ:KVHI), Ames National Corporation (NASDAQ:ATLO), LogicBio Therapeutics, Inc. (NASDAQ:LOGC), and PCB Bancorp (NASDAQ:PCB). This group of stocks' market valuations are similar to SUNS's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position FKWL,2,15745,2 HQI,3,4775,2 LPL,9,21826,2 KVHI,5,15989,1 ATLO,3,11589,0 LOGC,6,85612,-2 PCB,4,29911,-1 Average,4.6,26492,0.6 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 4.6 hedge funds with bullish positions and the average amount invested in these stocks was $26 million. That figure was $2 million in SUNS's case. LG Display Co Ltd. (NYSE:LPL) is the most popular stock in this table. On the other hand Franklin Wireless Corp. (NASDAQ:FKWL) is the least popular one with only 2 bullish hedge fund positions. SLR Senior Investment Corp. (NASDAQ:SUNS) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for SUNS is 30.1. 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. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 17.2% in 2021 through June 11th and beat the market by 3.3 percentage points. A small number of hedge funds were also right about betting on SUNS, though not to the same extent, as the stock returned 7.8% since the end of Q1 (through June 11th) and outperformed the market.
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Disclosure: None. This article was originally published at Insider Monkey.