Although the masses and most of the financial media blame hedge funds for their exorbitant fee structure and disappointing performance, these investors have proved to have great stock picking abilities over the years (that's why their assets under management continue to swell). We believe hedge fund sentiment should serve as a crucial tool of an individual investor’s stock selection process, as it may offer great insights of how the brightest minds of the finance industry feel about specific stocks. After all, these people have access to smartest analysts and expensive data/information sources that individual investors can't match. So should one consider investing in Silgan Holdings Inc. (NASDAQ:SLGN)? The smart money sentiment can provide an answer to this question.
Is Silgan Holdings Inc. (NASDAQ:SLGN) a bargain? Money managers are reducing their bets on the stock. The number of bullish hedge fund bets were cut by 1 in recent months. Our calculations also showed that slgn 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' 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 market by 18 percentage points since May 2014 through December 3, 2018 (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.
Let's take a peek at the recent hedge fund action encompassing Silgan Holdings Inc. (NASDAQ:SLGN).
What have hedge funds been doing with Silgan Holdings Inc. (NASDAQ:SLGN)?
At Q3's end, a total of 12 of the hedge funds tracked by Insider Monkey were long this stock, a change of -8% from the second quarter of 2018. On the other hand, there were a total of 15 hedge funds with a bullish position in SLGN at the beginning of this year. With the smart money's capital changing hands, there exists a select group of noteworthy hedge fund managers who were increasing their holdings significantly (or already accumulated large positions).
More specifically, Cardinal Capital was the largest shareholder of Silgan Holdings Inc. (NASDAQ:SLGN), with a stake worth $81.7 million reported as of the end of September. Trailing Cardinal Capital was D E Shaw, which amassed a stake valued at $6.8 million. Renaissance Technologies, AQR Capital Management, and Point72 Asset Management were also very fond of the stock, giving the stock large weights in their portfolios.
Seeing as Silgan Holdings Inc. (NASDAQ:SLGN) has experienced bearish sentiment from the entirety of the hedge funds we track, it's safe to say that there lies a certain "tier" of hedge funds that decided to sell off their positions entirely in the third quarter. Intriguingly, Israel Englander's Millennium Management cut the biggest investment of the "upper crust" of funds followed by Insider Monkey, comprising an estimated $10.7 million in stock, and Alec Litowitz and Ross Laser's Magnetar Capital was right behind this move, as the fund dumped about $1.2 million worth. These moves are important to note, as total hedge fund interest fell by 1 funds in the third quarter.
Let's now take a look at hedge fund activity in other stocks similar to Silgan Holdings Inc. (NASDAQ:SLGN). These stocks are Physicians Realty Trust (NYSE:DOC), SkyWest, Inc. (NASDAQ:SKYW), The Geo Group, Inc. (NYSE:GEO), and AVX Corporation (NYSE:AVX). All of these stocks' market caps match SLGN's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position DOC,9,72284,-1 SKYW,14,157798,2 GEO,17,107139,5 AVX,16,151569,3 Average,14,122198,2.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 14 hedge funds with bullish positions and the average amount invested in these stocks was $122 million. That figure was $101 million in SLGN's case. The Geo Group, Inc. (NYSE:GEO) is the most popular stock in this table. On the other hand Physicians Realty Trust (NYSE:DOC) is the least popular one with only 9 bullish hedge fund positions. Silgan Holdings Inc. (NASDAQ:SLGN) 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. In this regard GEO might be a better candidate to consider a long position.
Disclosure: None. This article was originally published at Insider Monkey.