Russell 2000 ETF (IWM) lagged the larger S&P 500 ETF (SPY) by more than 10 percentage points since the end of the third quarter of 2018 as investors first worried over the possible ramifications of rising interest rates and the escalation of the trade war with China. The hedge funds and institutional investors we track typically invest more in smaller-cap stocks than an average investor (i.e. only about 60% S&P 500 constituents were among the 500 most popular stocks among hedge funds), and we have seen data that shows those funds paring back their overall exposure. Those funds cutting positions in small-caps is one reason why volatility has increased. In the following paragraphs, we take a closer look at what hedge funds and prominent investors think of Standex Int'l Corp. (NYSE:SXI) and see how the stock is affected by the recent hedge fund activity.
Standex Int'l Corp. (NYSE:SXI) investors should pay attention to an increase in support from the world's most elite money managers lately. SXI was in 16 hedge funds' portfolios at the end of the third quarter of 2019. There were 9 hedge funds in our database with SXI holdings at the end of the previous quarter. Our calculations also showed that SXI isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds' large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were 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'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 27.8% through November 21, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
[caption id="attachment_338410" align="alignnone" width="2480"] Jeffrey Bronchick of Cove Street 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. Keeping this in mind we're going to take a look at the recent hedge fund action regarding Standex Int'l Corp. (NYSE:SXI).
What does smart money think about Standex Int'l Corp. (NYSE:SXI)?
Heading into the fourth quarter of 2019, a total of 16 of the hedge funds tracked by Insider Monkey were long this stock, a change of 78% from the second quarter of 2019. By comparison, 12 hedge funds held shares or bullish call options in SXI 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, Cove Street Capital held the most valuable stake in Standex Int'l Corp. (NYSE:SXI), which was worth $12 million at the end of the third quarter. On the second spot was Millennium Management which amassed $7.5 million worth of shares. GAMCO Investors, Marshall Wace, and Two Sigma Advisors 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 Cove Street Capital allocated the biggest weight to Standex Int'l Corp. (NYSE:SXI), around 1.67% of its 13F portfolio. Weld Capital Management is also relatively very bullish on the stock, designating 0.17 percent of its 13F equity portfolio to SXI.
Now, key hedge funds have jumped into Standex Int'l Corp. (NYSE:SXI) headfirst. Marshall Wace, managed by Paul Marshall and Ian Wace, initiated the most outsized position in Standex Int'l Corp. (NYSE:SXI). Marshall Wace had $3.9 million invested in the company at the end of the quarter. Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital also initiated a $1.8 million position during the quarter. The following funds were also among the new SXI investors: David E. Shaw's D E Shaw, Minhua Zhang's Weld Capital Management, and David E. Shaw's D E Shaw.
Let's go over hedge fund activity in other stocks similar to Standex Int'l Corp. (NYSE:SXI). These stocks are Sunnova Energy International Inc. (NYSE:NOVA), CNX Midstream Partners LP (NYSE:CNXM), BrightSphere Investment Group plc (NYSE:BSIG), and Corindus Vascular Robotics Inc (NYSE:CVRS). This group of stocks' market caps resemble SXI's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position NOVA,9,60529,9 CNXM,6,13254,1 BSIG,21,274795,2 CVRS,21,291630,12 Average,14.25,160052,6 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 14.25 hedge funds with bullish positions and the average amount invested in these stocks was $160 million. That figure was $44 million in SXI's case. BrightSphere Investment Group plc (NYSE:BSIG) is the most popular stock in this table. On the other hand CNX Midstream Partners LP (NYSE:CNXM) is the least popular one with only 6 bullish hedge fund positions. Standex Int'l Corp. (NYSE:SXI) 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 SXI, though not to the same extent, as the stock returned 6.1% during the first two months of the fourth quarter and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.