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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. We at Insider Monkey have plowed through 823 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds' and investors' portfolio positions as of June 30th, when the S&P 500 Index was trading around the 3100 level. Stocks kept going up since then. In this article we look at how hedge funds traded Sensient Technologies Corporation (NYSE:SXT) and determine whether the smart money was really smart about this stock.
Sensient Technologies Corporation (NYSE:SXT) shares haven't seen a lot of action during the second quarter. Overall, hedge fund sentiment was unchanged. The stock was in 23 hedge funds' portfolios at the end of the second quarter of 2020. Our calculations also showed that SXT 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). At the end of this article we will also compare SXT to other stocks including LGI Homes Inc (NASDAQ:LGIH), ESCO Technologies Inc. (NYSE:ESE), and Cleveland-Cliffs Inc (NYSE:CLF) 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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 56 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'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 34% through August 17th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Noam Gottesman of GLG Partners
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 precious metals prices. So, we are checking out this lithium company which could also benefit from the electric car adoption. 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. With all of this in mind we're going to take a look at the recent hedge fund action surrounding Sensient Technologies Corporation (NYSE:SXT).
How have hedgies been trading Sensient Technologies Corporation (NYSE:SXT)?
At second quarter's end, a total of 23 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the previous quarter. On the other hand, there were a total of 12 hedge funds with a bullish position in SXT a year ago. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, GAMCO Investors held the most valuable stake in Sensient Technologies Corporation (NYSE:SXT), which was worth $27.4 million at the end of the third quarter. On the second spot was Arrowstreet Capital which amassed $25.5 million worth of shares. Balyasny Asset Management, Sandbar Asset Management, and Marshall Wace LLP were 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 Sandbar Asset Management allocated the biggest weight to Sensient Technologies Corporation (NYSE:SXT), around 6.69% of its 13F portfolio. GAMCO Investors is also relatively very bullish on the stock, designating 0.31 percent of its 13F equity portfolio to SXT.
Seeing as Sensient Technologies Corporation (NYSE:SXT) has witnessed falling interest from the entirety of the hedge funds we track, it's easy to see that there is a sect of hedge funds that decided to sell off their entire stakes heading into Q3. It's worth mentioning that Chuck Royce's Royce & Associates cut the biggest investment of the "upper crust" of funds watched by Insider Monkey, comprising an estimated $1 million in stock, and Steve Cohen's Point72 Asset Management was right behind this move, as the fund dumped about $0.9 million worth. These transactions are interesting, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as Sensient Technologies Corporation (NYSE:SXT) but similarly valued. These stocks are LGI Homes Inc (NASDAQ:LGIH), ESCO Technologies Inc. (NYSE:ESE), Cleveland-Cliffs Inc (NYSE:CLF), Progyny, Inc. (NASDAQ:PGNY), Primo Water Corporation (NYSE:PRMW), Shake Shack Inc (NYSE:SHAK), and New Fortress Energy Inc. (NASDAQ:NFE). This group of stocks' market valuations are closest to SXT's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position LGIH,22,108240,8 ESE,7,69080,-1 CLF,25,161525,2 PGNY,19,64397,9 PRMW,31,624565,-5 SHAK,22,458714,0 NFE,5,24818,3 Average,18.7,215906,2.3 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 18.7 hedge funds with bullish positions and the average amount invested in these stocks was $216 million. That figure was $170 million in SXT's case. Primo Water Corporation (NYSE:PRMW) is the most popular stock in this table. On the other hand New Fortress Energy Inc. (NASDAQ:NFE) is the least popular one with only 5 bullish hedge fund positions. Sensient Technologies Corporation (NYSE:SXT) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for SXT is 69.6. 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 gained 24.8% in 2020 through the end of third quarter and still beat the market by 19.3 percentage points. Hedge funds were also right about betting on SXT as the stock returned 11.5% during Q3 and outperformed the market. Hedge funds were rewarded for their relative bullishness.
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Disclosure: None. This article was originally published at Insider Monkey.