Should I Avoid Stewart Information Services Corp (STC)?
The 800+ hedge funds and famous money managers tracked by Insider Monkey have already compiled and submitted their 13F filings for the first quarter, which unveil their equity positions as of March 31st. We went through these filings, fixed typos and other more significant errors and identified the changes in hedge fund portfolios. Our extensive review of these public filings is finally over, so this article is set to reveal the smart money sentiment towards Stewart Information Services Corp (NYSE:STC).
Is Stewart Information Services Corp (NYSE:STC) ready to rally soon? The smart money was getting less bullish. The number of long hedge fund positions dropped by 1 lately. Stewart Information Services Corp (NYSE:STC) was in 19 hedge funds' portfolios at the end of March. The all time high for this statistic is 20. Our calculations also showed that STC isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings). There were 20 hedge funds in our database with STC holdings at the end of December.
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.
Paul Marshall of Marshall Wace
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Do Hedge Funds Think STC Is A Good Stock To Buy Now?
At first quarter's end, a total of 19 of the hedge funds tracked by Insider Monkey were long this stock, a change of -5% from one quarter earlier. By comparison, 14 hedge funds held shares or bullish call options in STC a year ago. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
When looking at the institutional investors followed by Insider Monkey, Royce & Associates, managed by Chuck Royce, holds the most valuable position in Stewart Information Services Corp (NYSE:STC). Royce & Associates has a $37.7 million position in the stock, comprising 0.3% of its 13F portfolio. Coming in second is Renaissance Technologies, with a $29.2 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Remaining peers that hold long positions encompass George McCabe's Portolan Capital Management, Israel Englander's Millennium Management and Allon Hellmann's Full18 Capital. In terms of the portfolio weights assigned to each position Full18 Capital allocated the biggest weight to Stewart Information Services Corp (NYSE:STC), around 2.52% of its 13F portfolio. Portolan Capital Management is also relatively very bullish on the stock, designating 0.45 percent of its 13F equity portfolio to STC.
Because Stewart Information Services Corp (NYSE:STC) has witnessed falling interest from the aggregate hedge fund industry, it's easy to see that there was a specific group of hedgies who were dropping their full holdings in the first quarter. It's worth mentioning that Ravi Chopra's Azora Capital dropped the biggest investment of the 750 funds monitored by Insider Monkey, totaling an estimated $11.5 million in stock. Charles Clough's fund, Clough Capital Partners, also sold off its stock, about $9.9 million worth. These moves are intriguing to say the least, as total hedge fund interest was cut by 1 funds in the first quarter.
Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as Stewart Information Services Corp (NYSE:STC) but similarly valued. These stocks are Docebo Inc. (NASDAQ:DCBO), Axcelis Technologies Inc (NASDAQ:ACLS), Broadmark Realty Capital Inc. (NYSE:BRMK), Supernus Pharmaceuticals Inc (NASDAQ:SUPN), Encore Wire Corporation (NASDAQ:WIRE), Whiting Petroleum Corporation (NYSE:WLL), and First Commonwealth Financial (NYSE:FCF). This group of stocks' market valuations are closest to STC's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position DCBO,10,170421,0 ACLS,21,167802,3 BRMK,12,98728,2 SUPN,15,183518,-4 WIRE,19,81041,3 WLL,21,223784,5 FCF,13,21078,1 Average,15.9,135196,1.4 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 15.9 hedge funds with bullish positions and the average amount invested in these stocks was $135 million. That figure was $104 million in STC's case. Axcelis Technologies Inc (NASDAQ:ACLS) is the most popular stock in this table. On the other hand Docebo Inc. (NASDAQ:DCBO) is the least popular one with only 10 bullish hedge fund positions. Stewart Information Services Corp (NYSE:STC) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for STC is 73.4. 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 23.8% in 2021 through July 16th and still beat the market by 7.7 percentage points. Hedge funds were also right about betting on STC, though not to the same extent, as the stock returned 9.2% since Q1 (through July 16th) and outperformed the market as well.
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Disclosure: None. This article was originally published at Insider Monkey.
