Our extensive research has shown that imitating the smart money can generate significant returns for retail investors, which is why we track nearly 817 active prominent money managers and analyze their quarterly 13F filings. The stocks that are heavily bought by hedge funds historically outperformed the market, though there is no shortage of high profile failures like hedge funds' 2018 losses in Facebook and Apple. Let’s take a closer look at what the funds we track think about Sundial Growers Inc. (NASDAQ:SNDL) in this article.
Is Sundial Growers (SNDL) a good stock to buy now? Prominent investors were buying. The number of bullish hedge fund bets inched up by 3 lately. Sundial Growers Inc. (NASDAQ:SNDL) was in 6 hedge funds' portfolios at the end of the third quarter of 2020. The all time high for this statistics is 8. Our calculations also showed that SNDL 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). There were 3 hedge funds in our database with SNDL positions at the end of the second quarter. Video: Watch our video about the top 5 most popular hedge fund stocks.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 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.
Sander Gerber of Hudson Bay 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 15 best blue chip stocks to pick the best large-cap stocks to buy. 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. Now we're going to analyze the fresh hedge fund action regarding Sundial Growers Inc. (NASDAQ:SNDL).
Hedge fund activity in Sundial Growers Inc. (NASDAQ:SNDL)
At the end of September, a total of 6 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 100% from the second quarter of 2020. By comparison, 8 hedge funds held shares or bullish call options in SNDL 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.
Among these funds, Hudson Bay Capital Management held the most valuable stake in Sundial Growers Inc. (NASDAQ:SNDL), which was worth $3.1 million at the end of the third quarter. On the second spot was Renaissance Technologies which amassed $0.4 million worth of shares. Arrowgrass Capital Partners, Adage Capital Management, 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 Arrowgrass Capital Partners allocated the biggest weight to Sundial Growers Inc. (NASDAQ:SNDL), around 100% of its 13F portfolio. Hudson Bay Capital Management is also relatively very bullish on the stock, earmarking 0.05 percent of its 13F equity portfolio to SNDL.
As industrywide interest jumped, key money managers have jumped into Sundial Growers Inc. (NASDAQ:SNDL) headfirst. Hudson Bay Capital Management, managed by Sander Gerber, assembled the most outsized position in Sundial Growers Inc. (NASDAQ:SNDL). Hudson Bay Capital Management had $3.1 million invested in the company at the end of the quarter. Renaissance Technologies also made a $0.4 million investment in the stock during the quarter. The only other fund with a new position in the stock is Israel Englander's Millennium Management.
Let's now review hedge fund activity in other stocks - not necessarily in the same industry as Sundial Growers Inc. (NASDAQ:SNDL) but similarly valued. We will take a look at Transenterix Inc (NYSE:TRXC), QuickLogic Corporation (NASDAQ:QUIK), Acer Therapeutics Inc. (NASDAQ:ACER), Support.com, Inc. (NASDAQ:SPRT), Newgioco Group, Inc. (NYSE:NWGI), Virco Mfg. Corporation (NASDAQ:VIRC), and Altisource Asset Management Corp (NYSE:AAMC). All of these stocks' market caps resemble SNDL's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position TRXC,2,984,-4 QUIK,1,730,0 ACER,2,2928,-2 SPRT,6,4505,1 NWGI,1,207,1 VIRC,3,2890,1 AAMC,1,773,0 Average,2.3,1860,-0.4 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 2.3 hedge funds with bullish positions and the average amount invested in these stocks was $2 million. That figure was $4 million in SNDL's case. Support.com, Inc. (NASDAQ:SPRT) is the most popular stock in this table. On the other hand QuickLogic Corporation (NASDAQ:QUIK) is the least popular one with only 1 bullish hedge fund positions. Sundial Growers Inc. (NASDAQ:SNDL) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for SNDL is 80.5. 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 30.7% in 2020 through November 27th and still beat the market by 16.1 percentage points. Hedge funds were also right about betting on SNDL as the stock returned 54.4% since the end of Q3 (through 11/27) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
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Disclosure: None. This article was originally published at Insider Monkey.