Hedge funds are known to underperform the bull markets but that’s not because they are bad at investing. Truth be told, most hedge fund managers and other smaller players within this industry are very smart and skilled investors. Of course, they may also make wrong bets in some instances, but no one knows what the future holds and how market participants will react to the bountiful news that floods in each day. Hedge funds underperform because they are hedged. The Standard and Poor’s 500 Total Return Index ETFs returned 31.2% last year. Conversely, hedge funds’ top 20 large-cap stock picks generated a return of 41.3% during the same period. An average long/short hedge fund returned only a fraction of this due to the hedges they implement and the large fees they charge. Our research covering the last 18 years indicates that investors can outperform the market by imitating hedge funds’ consensus stock picks rather than directly investing in hedge funds. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like Scientific Games Corp (NASDAQ:SGMS).
Scientific Games Corp (NASDAQ:SGMS) has experienced a decrease in support from the world’s most elite money managers recently. Our calculations also showed that SGMS isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video at the end of this article for Q2 rankings).
In the 21st century investor’s toolkit there are numerous metrics stock market investors put to use to appraise their stock investments. A couple of the most useful metrics are hedge fund and insider trading sentiment. We have shown that, historically, those who follow the top picks of the best investment managers can beat the market by a significant amount (see the details here).