Hedge Fund Sentiment Is Stagnant On Strattec Security Corp. (STRT)
Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds' and successful investors' positions as of the end of the first quarter. You can find articles about an individual hedge fund's trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 4.5 years and analyze what the smart money thinks of Strattec Security Corp. (NASDAQ:STRT) based on that data.
Hedge fund interest in Strattec Security Corp. (NASDAQ:STRT) shares was flat at the end of last quarter. This is usually a negative indicator. At the end of this article we will also compare STRT to other stocks including LMP Automotive Holdings, Inc. (NASDAQ:LMPX), Trevi Therapeutics, Inc. (NASDAQ:TRVI), and Bassett Furniture Industries Inc. (NASDAQ:BSET) to get a better sense of its popularity.
Video: Watch our video about the top 5 most popular hedge fund stocks.
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 51 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.
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020's unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out stocks recommended/scorned by legendary Bill Miller. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind let's go over the key hedge fund action encompassing Strattec Security Corp. (NASDAQ:STRT).
What have hedge funds been doing with Strattec Security Corp. (NASDAQ:STRT)?
At Q1's end, a total of 4 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards STRT over the last 18 quarters. With hedgies' positions undergoing their usual ebb and flow, there exists an "upper tier" of noteworthy hedge fund managers who were adding to their stakes substantially (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Mario Gabelli's GAMCO Investors has the number one position in Strattec Security Corp. (NASDAQ:STRT), worth close to $4.3 million, comprising 0.1% of its total 13F portfolio. Sitting at the No. 2 spot is Ariel Investments, managed by John W. Rogers, which holds a $3.3 million position; the fund has 0.1% of its 13F portfolio invested in the stock. Other hedge funds and institutional investors with similar optimism consist of Renaissance Technologies, Gavin Saitowitz and Cisco J. del Valle's Springbok Capital and . In terms of the portfolio weights assigned to each position Ariel Investments allocated the biggest weight to Strattec Security Corp. (NASDAQ:STRT), around 0.06% of its 13F portfolio. GAMCO Investors is also relatively very bullish on the stock, dishing out 0.05 percent of its 13F equity portfolio to STRT.
Earlier we told you that the aggregate hedge fund interest in the stock was unchanged and we view this as a negative development. Even though there weren't any hedge funds dumping their holdings during the third quarter, there weren't any hedge funds initiating brand new positions. This indicates that hedge funds, at the very best, perceive this stock as dead money and they haven't identified any viable catalysts that can attract investor attention.
Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as Strattec Security Corp. (NASDAQ:STRT) but similarly valued. These stocks are LMP Automotive Holdings, Inc. (NASDAQ:LMPX), Trevi Therapeutics, Inc. (NASDAQ:TRVI), Bassett Furniture Industries Inc. (NASDAQ:BSET), and Intellicheck Mobilisa, Inc. (NYSE:IDN). This group of stocks' market caps match STRT's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position LMPX,1,292,0 TRVI,2,580,-2 BSET,10,10660,2 IDN,3,1479,-1 Average,4,3253,-0.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 4 hedge funds with bullish positions and the average amount invested in these stocks was $3 million. That figure was $9 million in STRT's case. Bassett Furniture Industries Inc. (NASDAQ:BSET) is the most popular stock in this table. On the other hand LMP Automotive Holdings, Inc. (NASDAQ:LMPX) is the least popular one with only 1 bullish hedge fund positions. Strattec Security Corp. (NASDAQ:STRT) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we'd rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 8.3% in 2020 through the end of May and surpassed the market by 13.2 percentage points. Unfortunately STRT wasn't nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); STRT investors were disappointed as the stock returned -10.9% during the second quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 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.
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