World-class money managers like Ken Griffin and Barry Rosenstein only invest their wealthy clients' money after undertaking a rigorous examination of any potential stock. They are particularly successful in this regard when it comes to small-cap stocks, which their peerless research gives them a big information advantage on when it comes to judging their worth. It's not surprising then that they generate their biggest returns from these stocks and invest more of their money in these stocks on average than other investors. It's also not surprising then that we pay close attention to these picks ourselves and have built a market-beating investment strategy around them.
Sensient Technologies Corporation (NYSE:SXT) was in 15 hedge funds' portfolios at the end of December. SXT has seen an increase in enthusiasm from smart money of late. There were 11 hedge funds in our database with SXT positions at the end of the previous quarter. Our calculations also showed that SXT isn't among the 30 most popular stocks among hedge funds.
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 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 market by 32 percentage points since May 2014 through March 12, 2019 (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 27.5% through March 12, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
We're going to take a gander at the latest hedge fund action encompassing Sensient Technologies Corporation (NYSE:SXT).
What have hedge funds been doing with Sensient Technologies Corporation (NYSE:SXT)?
Heading into the first quarter of 2019, a total of 15 of the hedge funds tracked by Insider Monkey were long this stock, a change of 36% from the previous quarter. By comparison, 17 hedge funds held shares or bullish call options in SXT a year ago. With hedgies' positions undergoing their usual ebb and flow, there exists a few noteworthy hedge fund managers who were increasing their stakes substantially (or already accumulated large positions).
The largest stake in Sensient Technologies Corporation (NYSE:SXT) was held by GAMCO Investors, which reported holding $34.2 million worth of stock at the end of September. It was followed by York Capital Management with a $24.1 million position. Other investors bullish on the company included Echo Street Capital Management, Citadel Investment Group, and D E Shaw.
Now, specific money managers were leading the bulls' herd. Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, assembled the most valuable position in Sensient Technologies Corporation (NYSE:SXT). Arrowstreet Capital had $0.8 million invested in the company at the end of the quarter. Bruce Kovner's Caxton Associates LP also made a $0.2 million investment in the stock during the quarter. The following funds were also among the new SXT investors: Stephen Loukas, David A. Lorber, Zachary George's FrontFour Capital Group and Paul Marshall and Ian Wace's Marshall Wace LLP.
Let's go over hedge fund activity in other stocks similar to Sensient Technologies Corporation (NYSE:SXT). These stocks are HMS Holdings Corp. (NASDAQ:HMSY), Transportadora de Gas del Sur SA (NYSE:TGS), AmeriGas Partners, L.P. (NYSE:APU), and TC Pipelines, LP (NYSE:TCP). This group of stocks' market caps are similar to SXT's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position HMSY,22,134551,6 TGS,8,42096,-1 APU,4,18074,-2 TCP,2,4806,-2 Average,9,49882,0.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 9 hedge funds with bullish positions and the average amount invested in these stocks was $50 million. That figure was $85 million in SXT's case. HMS Holdings Corp. (NASDAQ:HMSY) is the most popular stock in this table. On the other hand TC Pipelines, LP (NYSE:TCP) is the least popular one with only 2 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 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. Hedge funds were also right about betting on SXT, though not to the same extent, as the stock returned 23.7% and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.