Is Steelcase Inc. (NYSE:SCS) a good equity to bet on right now? We like to check what the smart money thinks first before doing extensive research. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It's not surprising given that hedge funds have access to better information and more resources to find the latest market-moving information.
Steelcase Inc. (NYSE:SCS) was in 19 hedge funds' portfolios at the end of the third quarter of 2018. SCS investors should be aware of an increase in hedge fund sentiment of late. There were 15 hedge funds in our database with SCS positions at the end of the previous quarter. Our calculations also showed that SCS isn't among the 30 most popular stocks among hedge funds.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 market by 18 percentage points since May 2014 through December 3, 2018 (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. Even if you aren't comfortable with shorting stocks, you should at least avoid initiating long positions in our short portfolio.
We're going to go over the latest hedge fund action encompassing Steelcase Inc. (NYSE:SCS).
What does the smart money think about Steelcase Inc. (NYSE:SCS)?
At the end of the third quarter, a total of 19 of the hedge funds tracked by Insider Monkey were long this stock, a change of 27% from the second quarter of 2018. On the other hand, there were a total of 14 hedge funds with a bullish position in SCS at the beginning of this year. With hedge funds' capital changing hands, there exists a select group of key hedge fund managers who were upping their stakes substantially (or already accumulated large positions).
More specifically, Pzena Investment Management was the largest shareholder of Steelcase Inc. (NYSE:SCS), with a stake worth $54.2 million reported as of the end of September. Trailing Pzena Investment Management was Royce & Associates, which amassed a stake valued at $20.8 million. GLG Partners, Two Sigma Advisors, and Citadel Investment Group were also very fond of the stock, giving the stock large weights in their portfolios.
Consequently, specific money managers were leading the bulls' herd. Marshall Wace LLP, managed by Paul Marshall and Ian Wace, created the most valuable position in Steelcase Inc. (NYSE:SCS). Marshall Wace LLP had $1.8 million invested in the company at the end of the quarter. Michael Platt and William Reeves's BlueCrest Capital Mgmt. also initiated a $1.4 million position during the quarter. The other funds with new positions in the stock are Peter Muller's PDT Partners, Ken Griffin's Citadel Investment Group, and David Costen Haley's HBK Investments.
Let's now review hedge fund activity in other stocks similar to Steelcase Inc. (NYSE:SCS). These stocks are Tellurian Inc. (NASDAQ:TELL), Tower Semiconductor Ltd. (NASDAQ:TSEM), trivago N.V. (NASDAQ:TRVG), and Tanger Factory Outlet Centers Inc. (NYSE:SKT). This group of stocks' market caps resemble SCS's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position TELL,14,76226,-1 TSEM,13,286560,0 TRVG,9,171444,2 SKT,11,71468,-2 Average,11.75,151425,-0.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 11.75 hedge funds with bullish positions and the average amount invested in these stocks was $151 million. That figure was $132 million in SCS's case. Tellurian Inc. (NASDAQ:TELL) is the most popular stock in this table. On the other hand trivago N.V. (NASDAQ:TRVG) is the least popular one with only 9 bullish hedge fund positions. Compared to these stocks Steelcase Inc. (NYSE:SCS) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.
Disclosure: None. This article was originally published at Insider Monkey.