Is SailPoint Technologies Holdings, Inc. (SAIL) Going to Burn These Hedge Funds?

Nina Todic

Updated Tue, Dec 18, 2018, 9:24 PM

Hedge funds and other investment firms that we track manage billions of dollars of their wealthy clients' money, and needless to say, they are painstakingly thorough when analyzing where to invest this money, as their own wealth depends on it. Regardless of the various methods used by elite investors like David Tepper and Dan Loeb, the resources they expend are second-to-none. This is especially valuable when it comes to small-cap stocks, which is where they generate their strongest outperformance, as their resources give them a huge edge when it comes to studying these stocks compared to the average investor, which is why we intently follow their activity in the small-cap space.

Is SailPoint Technologies Holdings, Inc. (NYSE:SAIL) a buy, sell, or hold? Money managers are getting more bullish. The number of bullish hedge fund bets rose by 2 recently. Our calculations also showed that sail isn't among the 30 most popular stocks among hedge funds. SAIL was in 17 hedge funds' portfolios at the end of September. There were 15 hedge funds in our database with SAIL positions at the end of the previous quarter.

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 6.3% year to date (through December 3rd) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 18 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 glance at the recent hedge fund action surrounding SailPoint Technologies Holdings, Inc. (NYSE:SAIL).

Hedge fund activity in SailPoint Technologies Holdings, Inc. (NYSE:SAIL)

Heading into the fourth quarter of 2018, a total of 17 of the hedge funds tracked by Insider Monkey were long this stock, a change of 13% from the second quarter of 2018. By comparison, 9 hedge funds held shares or bullish call options in SAIL heading into this year. With hedgies' positions undergoing their usual ebb and flow, there exists an "upper tier" of noteworthy hedge fund managers who were increasing their stakes considerably (or already accumulated large positions).

The largest stake in SailPoint Technologies Holdings, Inc. (NYSE:SAIL) was held by Whale Rock Capital Management, which reported holding $103.5 million worth of stock at the end of September. It was followed by Balyasny Asset Management with a $34.2 million position. Other investors bullish on the company included Laurion Capital Management, Millennium Management, and Point72 Asset Management.

Consequently, some big names were leading the bulls' herd. Renaissance Technologies, managed by Jim Simons, created the largest position in SailPoint Technologies Holdings, Inc. (NYSE:SAIL). Renaissance Technologies had $16.6 million invested in the company at the end of the quarter. Andrew Sandler's Sandler Capital Management also made a $14.6 million investment in the stock during the quarter. The other funds with new positions in the stock are Sander Gerber's Hudson Bay Capital Management, Jeffrey Talpins's Element Capital Management, and Paul Tudor Jones's Tudor Investment Corp.

Let's now take a look at hedge fund activity in other stocks similar to SailPoint Technologies Holdings, Inc. (NYSE:SAIL). We will take a look at White Mountains Insurance Group Ltd (NYSE:WTM), KBR, Inc. (NYSE:KBR), Strategic Education, Inc. (NASDAQ:STRA), and Houlihan Lokey Inc (NYSE:HLI). This group of stocks' market valuations match SAIL's market valuation.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position WTM,16,188873,3 KBR,19,490619,-2 STRA,15,255963,3 HLI,14,205633,-4 Average,16,285272,0 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 16 hedge funds with bullish positions and the average amount invested in these stocks was $285 million. That figure was $283 million in SAIL's case. KBR, Inc. (NYSE:KBR) is the most popular stock in this table. On the other hand Houlihan Lokey Inc (NYSE:HLI) is the least popular one with only 14 bullish hedge fund positions. SailPoint Technologies Holdings, Inc. (NYSE:SAIL) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we'd rather spend our time researching stocks that hedge funds are piling on. In this regard KBR might be a better candidate to consider a long position.

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

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