Hedge Funds Dropped The Ball On Stage Stores Inc (SSI)
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 752 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 September 30th. In this article we look at what those investors think of Stage Stores Inc (NYSE:SSI).
Is Stage Stores Inc (NYSE:SSI) a good stock to buy now? Prominent investors are in a bullish mood. The number of long hedge fund positions improved by 1 recently. Our calculations also showed that SSI isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). SSI was in 6 hedge funds' portfolios at the end of the third quarter of 2019. There were 5 hedge funds in our database with SSI positions at the end of the previous quarter.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
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 Russell 2000 ETFs by 40 percentage points since May 2014 (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 stocks that are in our short portfolio.
[caption id="attachment_694254" align="alignnone" width="1680"]
Andrew Axelrod of Axar Capital[/caption]
We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. One of the most bullish analysts in America just put his money where his mouth is. He says, "I'm investing more today than I did back in early 2009." So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We even check out this option genius' weekly trade ideas. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager's investor letter and the stock already gained 20 percent. Now we're going to take a glance at the latest hedge fund action surrounding Stage Stores Inc (NYSE:SSI).
How are hedge funds trading Stage Stores Inc (NYSE:SSI)?
Heading into the fourth quarter of 2019, a total of 6 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 20% from the previous quarter. By comparison, 6 hedge funds held shares or bullish call options in SSI a year ago. With the smart money's positions undergoing their usual ebb and flow, there exists an "upper tier" of noteworthy hedge fund managers who were adding to their holdings significantly (or already accumulated large positions).
More specifically, Axar Capital was the largest shareholder of Stage Stores Inc (NYSE:SSI), with a stake worth $8.1 million reported as of the end of September. Trailing Axar Capital was Royce & Associates, which amassed a stake valued at $3.6 million. Renaissance Technologies, Citadel Investment Group, and D E Shaw 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 Axar Capital allocated the biggest weight to Stage Stores Inc (NYSE:SSI), around 45.29% of its 13F portfolio. Royce & Associates is also relatively very bullish on the stock, setting aside 0.03 percent of its 13F equity portfolio to SSI.
As industrywide interest jumped, key hedge funds were breaking ground themselves. ExodusPoint Capital, managed by Michael Gelband, established the biggest position in Stage Stores Inc (NYSE:SSI). ExodusPoint Capital had $0 million invested in the company at the end of the quarter.
Let's check out hedge fund activity in other stocks similar to Stage Stores Inc (NYSE:SSI). We will take a look at DLH Holdings Corp. (NASDAQ:DLHC), Greenpro Capital Corp. (NASDAQ:GRNQ), SPI Energy Co., Ltd. (NASDAQ:SPI), and The Goldfield Corporation (NYSE:GV). This group of stocks' market valuations are similar to SSI's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position DLHC,7,19081,0 GRNQ,1,73,0 SPI,1,37,0 GV,3,8888,0 Average,3,7020,0 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 3 hedge funds with bullish positions and the average amount invested in these stocks was $7 million. That figure was $13 million in SSI's case. DLH Holdings Corp. (NASDAQ:DLHC) is the most popular stock in this table. On the other hand Greenpro Capital Corp. (NASDAQ:GRNQ) is the least popular one with only 1 bullish hedge fund positions. Stage Stores Inc (NYSE:SSI) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Hedge funds were also right about betting on SSI as the stock returned 155.3% during the fourth quarter (through the end of November) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.
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