The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. Insider Monkey finished processing more than 730 13F filings submitted by hedge funds and prominent investors. These filings show these funds' portfolio positions as of June 28th, 2019. In this article we are going to take a look at smart money sentiment towards Stellus Capital Investment Corporation (NYSE:SCM).
Stellus Capital Investment Corporation (NYSE:SCM) has seen a decrease in activity from the world's largest hedge funds in recent months. Our calculations also showed that SCM isn't among the 30 most popular stocks among hedge funds (see the video below). Video: Click the image to 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' large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 25.7% through September 30, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
In addition to following the biggest hedge funds for investment ideas, we also share stock pitches from conferences, investor letters and other sources like this one where the fund manager is talking about two under the radar 1000% return potential stocks: first one in internet infrastructure and the second in the heart of advertising market. We use hedge fund buy/sell signals to determine whether to conduct in-depth analysis of these stock ideas which take days. Now we're going to take a gander at the recent hedge fund action encompassing Stellus Capital Investment Corporation (NYSE:SCM).
How are hedge funds trading Stellus Capital Investment Corporation (NYSE:SCM)?
At the end of the second quarter, a total of 4 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -33% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards SCM over the last 16 quarters. With the smart money's capital changing hands, there exists an "upper tier" of notable hedge fund managers who were upping their stakes meaningfully (or already accumulated large positions).
According to Insider Monkey's hedge fund database, Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital has the largest position in Stellus Capital Investment Corporation (NYSE:SCM), worth close to $6.1 million, comprising less than 0.1%% of its total 13F portfolio. The second largest stake is held by Two Sigma Advisors, managed by John Overdeck and David Siegel, which holds a $1.3 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Some other members of the smart money that are bullish consist of Israel Englander's Millennium Management, Peter Algert and Kevin Coldiron's Algert Coldiron Investors and .
Due to the fact that Stellus Capital Investment Corporation (NYSE:SCM) has experienced a decline in interest from the aggregate hedge fund industry, we can see that there lies a certain "tier" of hedgies who were dropping their entire stakes last quarter. Interestingly, Paul Marshall and Ian Wace's Marshall Wace LLP dumped the largest stake of all the hedgies followed by Insider Monkey, worth about $0.3 million in stock, and Ken Griffin's Citadel Investment Group was right behind this move, as the fund dumped about $0.3 million worth. These transactions are interesting, as aggregate hedge fund interest dropped by 2 funds last quarter.
Let's check out hedge fund activity in other stocks similar to Stellus Capital Investment Corporation (NYSE:SCM). These stocks are Value Line, Inc. (NASDAQ:VALU), Geron Corporation (NASDAQ:GERN), U.S. Xpress Enterprises, Inc. (NYSE:USX), and Solar Senior Capital Ltd (NASDAQ:SUNS). All of these stocks' market caps are similar to SCM's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position VALU,2,4082,0 GERN,2,219,-3 USX,8,25626,-4 SUNS,1,767,-1 Average,3.25,7674,-2 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 3.25 hedge funds with bullish positions and the average amount invested in these stocks was $8 million. That figure was $8 million in SCM's case. U.S. Xpress Enterprises, Inc. (NYSE:USX) is the most popular stock in this table. On the other hand Solar Senior Capital Ltd (NASDAQ:SUNS) is the least popular one with only 1 bullish hedge fund positions. Stellus Capital Investment Corporation (NYSE:SCM) 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. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately SCM wasn't nearly as popular as these 20 stocks and hedge funds that were betting on SCM were disappointed as the stock returned 1% during the third 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 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
Disclosure: None. This article was originally published at Insider Monkey.
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