In this article you are going to find out whether hedge funds think Servicesource International Inc (NASDAQ:SREV) is a good investment right now. We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It's not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.
Is SREV a good stock to buy now? Servicesource International Inc (NASDAQ:SREV) has experienced a decrease in activity from the world's largest hedge funds recently. Servicesource International Inc (NASDAQ:SREV) was in 9 hedge funds' portfolios at the end of the third quarter of 2020. The all time high for this statistics is 16. Our calculations also showed that SREV 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).
Video: Watch our video about the top 5 most popular hedge fund stocks.
At the moment there are a lot of indicators market participants use to evaluate their stock investments. A pair of the most underrated indicators are hedge fund and insider trading moves. We have shown that, historically, those who follow the top picks of the top money managers can outperform the market by a healthy margin (see the details here).
Izzy Englander of MILLENNIUM MANAGEMENT
Israel Englander of Millennium Management
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. With all of this in mind let's check out the fresh hedge fund action surrounding Servicesource International Inc (NASDAQ:SREV).
Do Hedge Funds Think SREV Is A Good Stock To Buy Now?
Heading into the fourth quarter of 2020, a total of 9 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -18% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in SREV over the last 21 quarters. With the smart money's sentiment swirling, there exists a select group of key hedge fund managers who were increasing their holdings significantly (or already accumulated large positions).
Among these funds, Archon Capital Management held the most valuable stake in Servicesource International Inc (NASDAQ:SREV), which was worth $11.8 million at the end of the third quarter. On the second spot was Renaissance Technologies which amassed $7 million worth of shares. Headlands Capital, Two Sigma Advisors, and Millennium Management 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 Headlands Capital allocated the biggest weight to Servicesource International Inc (NASDAQ:SREV), around 5.71% of its 13F portfolio. Archon Capital Management is also relatively very bullish on the stock, earmarking 2.37 percent of its 13F equity portfolio to SREV.
Judging by the fact that Servicesource International Inc (NASDAQ:SREV) has faced bearish sentiment from hedge fund managers, logic holds that there was a specific group of hedgies who sold off their entire stakes last quarter. At the top of the heap, J. Carlo Cannell's Cannell Capital dropped the biggest position of the 750 funds monitored by Insider Monkey, valued at close to $0.1 million in stock. Gavin Saitowitz and Cisco J. del Valle's fund, Springbok Capital, also said goodbye to its stock, about $0 million worth. These transactions are intriguing to say the least, as total hedge fund interest fell by 2 funds last quarter.
Let's go over hedge fund activity in other stocks similar to Servicesource International Inc (NASDAQ:SREV). These stocks are Lineage Cell Therapeutics, Inc. (NYSE:LCTX), Educational Development Corporation (NASDAQ:EDUC), Equillium, Inc. (NASDAQ:EQ), Penns Woods Bancorp, Inc. (NASDAQ:PWOD), Western Copper and Gold Corporation (NYSE:WRN), Investar Holding Corporation (NASDAQ:ISTR), and Celyad Oncology SA (NASDAQ:CYAD). All of these stocks' market caps are similar to SREV's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position LCTX,8,33137,-4 EDUC,3,5771,2 EQ,5,11814,1 PWOD,1,3405,0 WRN,3,2356,1 ISTR,5,13211,1 CYAD,1,126,-1 Average,3.7,9974,0 [/table]
As you can see these stocks had an average of 3.7 hedge funds with bullish positions and the average amount invested in these stocks was $10 million. That figure was $25 million in SREV's case. Lineage Cell Therapeutics, Inc. (NYSE:LCTX) is the most popular stock in this table. On the other hand Penns Woods Bancorp, Inc. (NASDAQ:PWOD) is the least popular one with only 1 bullish hedge fund positions. Compared to these stocks Servicesource International Inc (NASDAQ:SREV) is more popular among hedge funds. Our overall hedge fund sentiment score for SREV is 69.9. 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 32.9% in 2020 through December 8th and still beat the market by 16.2 percentage points. Unfortunately SREV wasn't nearly as popular as these 20 stocks and hedge funds that were betting on SREV were disappointed as the stock returned 10.2% since the end of the third quarter (through 12/8) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
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Disclosure: None. This article was originally published at Insider Monkey.
