The financial regulations require hedge funds and wealthy investors that exceeded the $100 million equity holdings threshold to file a report that shows their positions at the end of every quarter. Even though it isn't the intention, these filings to a certain extent level the playing field for ordinary investors. The latest round of 13F filings disclosed the funds' positions on March 31st, about a week after the S&P 500 Index bottomed. We at Insider Monkey have made an extensive database of more than 821 of those established hedge funds and famous value investors' filings. In this article, we analyze how these elite funds and prominent investors traded Shiloh Industries, Inc. (NASDAQ:SHLO) based on those filings.
Shiloh Industries, Inc. (NASDAQ:SHLO) investors should be aware of a decrease in hedge fund interest recently. Our calculations also showed that SHLO isn't among the 30 most popular stocks among hedge funds (click for Q1 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.
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 44 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.
[caption id="attachment_189632" align="aligncenter" width="400"] David Harding of Winton Capital Management[/caption]
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, legendary investor Bill Miller told investors to sell 7 extremely popular recession stocks last month. So, we went through his list and recommended another stock with 100% upside potential instead. We interview hedge fund managers and ask them about their best ideas. You can watch our latest hedge fund manager interview here and find out the name of the large-cap healthcare stock that Sio Capital's Michael Castor expects to double. 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 S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now we're going to take a glance at the latest hedge fund action encompassing Shiloh Industries, Inc. (NASDAQ:SHLO).
How are hedge funds trading Shiloh Industries, Inc. (NASDAQ:SHLO)?
At Q1's end, a total of 3 of the hedge funds tracked by Insider Monkey were long this stock, a change of -40% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards SHLO over the last 18 quarters. With hedge funds' positions undergoing their usual ebb and flow, there exists an "upper tier" of noteworthy hedge fund managers who were increasing their stakes substantially (or already accumulated large positions).
More specifically, Renaissance Technologies was the largest shareholder of Shiloh Industries, Inc. (NASDAQ:SHLO), with a stake worth $0.4 million reported as of the end of September. Trailing Renaissance Technologies was Royce & Associates, which amassed a stake valued at $0.4 million. Two Sigma Advisors was also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Royce & Associates allocated the biggest weight to Shiloh Industries, Inc. (NASDAQ:SHLO), around 0.01% of its 13F portfolio. Renaissance Technologies is also relatively very bullish on the stock, setting aside 0.0004 percent of its 13F equity portfolio to SHLO.
Judging by the fact that Shiloh Industries, Inc. (NASDAQ:SHLO) has experienced falling interest from hedge fund managers, we can see that there exists a select few funds who sold off their entire stakes by the end of the third quarter. Intriguingly, Frederick DiSanto's Ancora Advisors sold off the biggest stake of the "upper crust" of funds monitored by Insider Monkey, valued at an estimated $0.4 million in stock, and David Harding's Winton Capital Management was right behind this move, as the fund sold off about $0 million worth. These transactions are important to note, as aggregate hedge fund interest dropped by 2 funds by the end of the third quarter.
Let's now review hedge fund activity in other stocks - not necessarily in the same industry as Shiloh Industries, Inc. (NASDAQ:SHLO) but similarly valued. These stocks are Verb Technology Company, Inc. (NASDAQ:VERB), Superior Industries International Inc. (NYSE:SUP), Tantech Holdings Ltd. (NASDAQ:TANH), and Mohawk Group Holdings, Inc. (NASDAQ:MWK). All of these stocks' market caps are closest to SHLO's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position VERB,3,91,0 SUP,12,4878,-2 TANH,2,548,0 MWK,2,1386,0 Average,4.75,1726,-0.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 4.75 hedge funds with bullish positions and the average amount invested in these stocks was $2 million. That figure was $1 million in SHLO's case. Superior Industries International Inc. (NYSE:SUP) is the most popular stock in this table. On the other hand Tantech Holdings Ltd. (NASDAQ:TANH) is the least popular one with only 2 bullish hedge fund positions. Shiloh Industries, Inc. (NASDAQ:SHLO) 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 7.9% in 2020 through May 22nd and surpassed the market by 15.6 percentage points. Unfortunately SHLO wasn't nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); SHLO investors were disappointed as the stock returned -12.8% 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.
Disclosure: None. This article was originally published at Insider Monkey.