The elite funds run by legendary investors such as David Tepper and Dan Loeb make hundreds of millions of dollars for themselves and their investors by spending enormous resources doing research on small cap stocks that big investment banks don't follow. Because of their pay structures, they have strong incentives to do the research necessary to beat the market. That's why we pay close attention to what they think in small cap stocks. In this article, we take a closer look at Scorpio Bulkers Inc (NYSE:SALT) from the perspective of those elite funds.
Scorpio Bulkers Inc (NYSE:SALT) investors should be aware of a decrease in enthusiasm from smart money lately. SALT was in 9 hedge funds' portfolios at the end of the fourth quarter of 2018. There were 10 hedge funds in our database with SALT holdings at the end of the previous quarter. Our calculations also showed that SALT isn't among the 30 most popular stocks among hedge funds.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey's flagship best performing hedge funds strategy returned 20.7% year to date (through March 12th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 32 percentage points since its inception (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Kevin Michael Ulrich
Let's check out the key hedge fund action regarding Scorpio Bulkers Inc (NYSE:SALT).
How have hedgies been trading Scorpio Bulkers Inc (NYSE:SALT)?
At Q4's end, a total of 9 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -10% from the second quarter of 2018. The graph below displays the number of hedge funds with bullish position in SALT over the last 14 quarters. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Of the funds tracked by Insider Monkey, Valueworks LLC, managed by Charles Lemonides, holds the largest position in Scorpio Bulkers Inc (NYSE:SALT). Valueworks LLC has a $33.2 million position in the stock, comprising 2.3% of its 13F portfolio. Sitting at the No. 2 spot is Jim Simons of Renaissance Technologies, with a $7.5 million position; less than 0.1%% of its 13F portfolio is allocated to the company. Some other hedge funds and institutional investors with similar optimism encompass Chuck Royce's Royce & Associates, Kevin Michael Ulrich and Anthony Davis's Anchorage Advisors and Israel Englander's Millennium Management.
Due to the fact that Scorpio Bulkers Inc (NYSE:SALT) has witnessed declining sentiment from the entirety of the hedge funds we track, we can see that there was a specific group of hedge funds that decided to sell off their full holdings heading into Q3. Intriguingly, Michael Hintze's CQS Cayman LP dumped the biggest investment of the "upper crust" of funds tracked by Insider Monkey, totaling an estimated $1.7 million in stock, and Dmitry Balyasny's Balyasny Asset Management was right behind this move, as the fund cut about $0.7 million worth. These transactions are important to note, as aggregate hedge fund interest fell by 1 funds heading into Q3.
Let's check out hedge fund activity in other stocks similar to Scorpio Bulkers Inc (NYSE:SALT). These stocks are Arvinas, Inc. (NASDAQ:ARVN), Model N Inc (NYSE:MODN), The York Water Company (NASDAQ:YORW), and Great Lakes Dredge & Dock Corporation (NASDAQ:GLDD). This group of stocks' market values match SALT's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position ARVN,14,101574,-3 MODN,14,66447,0 YORW,5,15118,-1 GLDD,14,35672,5 Average,11.75,54703,0.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 11.75 hedge funds with bullish positions and the average amount invested in these stocks was $55 million. That figure was $58 million in SALT's case. Arvinas, Inc. (NASDAQ:ARVN) is the most popular stock in this table. On the other hand The York Water Company (NASDAQ:YORW) is the least popular one with only 5 bullish hedge fund positions. Scorpio Bulkers Inc (NYSE:SALT) 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 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. Unfortunately SALT wasn't nearly as popular as these 15 stock (hedge fund sentiment was quite bearish); SALT investors were disappointed as the stock returned -14.6% and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 15 most popular stocks) among hedge funds as 13 of these stocks already outperformed the market this year.
Disclosure: None. This article was originally published at Insider Monkey.