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Hedge Funds Are Dumping StoneCo Ltd. (STNE)

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A whopping number of 13F filings filed with U.S. Securities and Exchange Commission has been processed by Insider Monkey so that individual investors can look at the overall hedge fund sentiment towards the stocks included in their watchlists. These freshly-submitted public filings disclose money managers’ equity positions as of the end of the three-month period that ended March 31st, so let’s proceed with the discussion of the hedge fund sentiment on StoneCo Ltd. (NASDAQ:STNE).

Is StoneCo Ltd. (NASDAQ:STNE) a splendid investment now? The smart money was turning less bullish. The number of long hedge fund bets fell by 8 recently. StoneCo Ltd. (NASDAQ:STNE) was in 39 hedge funds' portfolios at the end of March. The all time high for this statistic is 47. Our calculations also showed that STNE isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings).

According to most market participants, hedge funds are perceived as slow, old financial vehicles of years past. While there are over 8000 funds trading at present, Our experts look at the masters of this club, approximately 850 funds. Most estimates calculate that this group of people direct most of the smart money's total asset base, and by keeping an eye on their finest picks, Insider Monkey has deciphered several investment strategies that have historically outpaced the broader indices. Insider Monkey's flagship short hedge fund strategy outpaced the S&P 500 short ETFs by around 20 percentage points per year since its inception in March 2017. Also, our monthly newsletter's portfolio of long stock picks returned 206.8% since March 2017 (through May 2021) and beat the S&P 500 Index by more than 115 percentage points. You can download a sample issue of this newsletter on our website .

John Armitage Egerton Capital
John Armitage Egerton Capital

John Armitage of Egerton Capital

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best battery stocks to pick the next Tesla that will deliver a 10x return. 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 homepage. Now let's take a look at the fresh hedge fund action surrounding StoneCo Ltd. (NASDAQ:STNE).

Do Hedge Funds Think STNE Is A Good Stock To Buy Now?

At the end of March, a total of 39 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -17% from the previous quarter. The graph below displays the number of hedge funds with bullish position in STNE over the last 23 quarters. So, let's find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is STNE A Good Stock To Buy?
Is STNE A Good Stock To Buy?

The largest stake in StoneCo Ltd. (NASDAQ:STNE) was held by Berkshire Hathaway, which reported holding $654.8 million worth of stock at the end of December. It was followed by Lone Pine Capital with a $400 million position. Other investors bullish on the company included Egerton Capital Limited, Tybourne Capital Management, and Echo Street Capital Management. In terms of the portfolio weights assigned to each position ROAM Global Management allocated the biggest weight to StoneCo Ltd. (NASDAQ:STNE), around 8.54% of its 13F portfolio. Prince Street Capital Management is also relatively very bullish on the stock, earmarking 7.43 percent of its 13F equity portfolio to STNE.

Due to the fact that StoneCo Ltd. (NASDAQ:STNE) has experienced bearish sentiment from the smart money, we can see that there was a specific group of hedge funds who were dropping their entire stakes last quarter. It's worth mentioning that Josh Resnick's Jericho Capital Asset Management dropped the biggest stake of the 750 funds monitored by Insider Monkey, valued at close to $161.1 million in stock. Glen Kacher's fund, Light Street Capital, also dumped its stock, about $96.9 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest was cut by 8 funds last quarter.

Let's now take a look at hedge fund activity in other stocks similar to StoneCo Ltd. (NASDAQ:STNE). These stocks are The Cooper Companies, Inc. (NYSE:COO), FirstEnergy Corp. (NYSE:FE), MGM Resorts International (NYSE:MGM), Farfetch Limited (NYSE:FTCH), Citizens Financial Group Inc (NYSE:CFG), Ubiquiti Inc. (NYSE:UI), and CGI Inc. (NYSE:GIB). All of these stocks' market caps match STNE's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position COO,43,1378040,12 FE,51,1840599,1 MGM,57,2715848,13 FTCH,57,3095281,10 CFG,41,579075,3 UI,19,278681,0 GIB,15,187732,0 Average,40.4,1439322,5.6 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 40.4 hedge funds with bullish positions and the average amount invested in these stocks was $1439 million. That figure was $2157 million in STNE's case. MGM Resorts International (NYSE:MGM) is the most popular stock in this table. On the other hand CGI Inc. (NYSE:GIB) is the least popular one with only 15 bullish hedge fund positions. StoneCo Ltd. (NASDAQ:STNE) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for STNE is 50.5. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 19.3% in 2021 through June 25th and beat the market by 4.8 percentage points. A small number of hedge funds were also right about betting on STNE, though not to the same extent, as the stock returned 10.2% since the end of Q1 (through June 25th) and outperformed the market.

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Disclosure: None. This article was originally published at Insider Monkey.