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At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (see why hell is coming). We reversed our stance on March 25th after seeing unprecedented fiscal and monetary stimulus unleashed by the Fed and the Congress. This is the perfect market for stock pickers, now that the stocks are fully valued again. In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards SunCoke Energy, Inc (NYSE:SXC) at the end of the second quarter and determine whether the smart money was really smart about this stock.
SunCoke Energy, Inc (NYSE:SXC) investors should be aware of an increase in hedge fund interest lately. SunCoke Energy, Inc (NYSE:SXC) was in 19 hedge funds' portfolios at the end of the second quarter of 2020. The all time high for this statistics is 35. Our calculations also showed that SXC isn't among the 30 most popular stocks among hedge funds (click for Q2 rankings and see the video for a quick look at the top 5 stocks).
Video: Watch our video about the top 5 most popular hedge fund stocks.
According to most investors, hedge funds are assumed to be worthless, outdated investment vehicles of the past. While there are greater than 8000 funds with their doors open today, We look at the moguls of this club, about 850 funds. These investment experts administer the lion's share of the smart money's total capital, and by monitoring their highest performing investments, Insider Monkey has spotted a number of investment strategies that have historically outpaced Mr. Market. Insider Monkey's flagship short hedge fund strategy outrun the S&P 500 short ETFs by around 20 percentage points a year since its inception in March 2017. Our portfolio of short stocks lost 34% since February 2017 (through August 17th) even though the market was up 53% during the same period. We just shared a list of 8 short targets in our latest quarterly update .
Gavin Saitowitz of Prelude Capital
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we are checking out this junior gold mining stock and we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website to get excerpts of these letters in your inbox. Now we're going to take a glance at the recent hedge fund action surrounding SunCoke Energy, Inc (NYSE:SXC).
What have hedge funds been doing with SunCoke Energy, Inc (NYSE:SXC)?
At the end of the second quarter, a total of 19 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 12% from the previous quarter. On the other hand, there were a total of 20 hedge funds with a bullish position in SXC a year ago. With hedge funds' positions undergoing their usual ebb and flow, there exists a few notable hedge fund managers who were boosting their stakes substantially (or already accumulated large positions).
The largest stake in SunCoke Energy, Inc (NYSE:SXC) was held by Mangrove Partners, which reported holding $15.2 million worth of stock at the end of September. It was followed by Renaissance Technologies with a $13.7 million position. Other investors bullish on the company included Tontine Asset Management, Nokomis Capital, and Contrarius Investment Management. In terms of the portfolio weights assigned to each position Mangrove Partners allocated the biggest weight to SunCoke Energy, Inc (NYSE:SXC), around 3.7% of its 13F portfolio. Nokomis Capital is also relatively very bullish on the stock, setting aside 2.53 percent of its 13F equity portfolio to SXC.
As industrywide interest jumped, key hedge funds were breaking ground themselves. Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, created the most valuable position in SunCoke Energy, Inc (NYSE:SXC). Arrowstreet Capital had $1.1 million invested in the company at the end of the quarter. Cliff Asness's AQR Capital Management also made a $0.5 million investment in the stock during the quarter. The other funds with brand new SXC positions are Paul Marshall and Ian Wace's Marshall Wace LLP, Michael Gelband's ExodusPoint Capital, and Gavin Saitowitz and Cisco J. del Valle's Springbok Capital.
Let's also examine hedge fund activity in other stocks similar to SunCoke Energy, Inc (NYSE:SXC). We will take a look at Retail Value Inc. (NYSE:RVI), CorePoint Lodging Inc. (NYSE:CPLG), Abeona Therapeutics Inc (NASDAQ:ABEO), Nam Tai Property Inc (NYSE:NTP), Oasis Petroleum Inc. (NASDAQ:OAS), Teekay Corporation (NYSE:TK), and Capital Southwest Corporation (NASDAQ:CSWC). This group of stocks' market valuations resemble SXC's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position RVI,16,75644,3 CPLG,12,19987,2 ABEO,18,73583,-1 NTP,6,43201,0 OAS,17,22024,4 TK,14,13255,1 CSWC,8,10289,1 Average,13,36855,1.4 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 13 hedge funds with bullish positions and the average amount invested in these stocks was $37 million. That figure was $59 million in SXC's case. Abeona Therapeutics Inc (NASDAQ:ABEO) is the most popular stock in this table. On the other hand Nam Tai Property Inc (NYSE:NTP) is the least popular one with only 6 bullish hedge fund positions. Compared to these stocks SunCoke Energy, Inc (NYSE:SXC) is more popular among hedge funds. Our overall hedge fund sentiment score for SXC is 73.3. 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 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 returned 24.8% in 2020 through the end of September but still managed to beat the market by 19.3 percentage points. Hedge funds were also right about betting on SXC as the stock returned 17.6% since the end of June and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.
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Disclosure: None. This article was originally published at Insider Monkey.