Is State Street Corporation (NYSE:STT) a good bet right now? We like to analyze hedge fund sentiment before doing days of in-depth research. We do so because hedge funds and other elite investors have numerous Ivy League graduates, expert network advisers, and supply chain tipsters working or consulting for them. There is not a shortage of news stories covering failed hedge fund investments and it is a fact that hedge funds' picks don't beat the market 100% of the time, but their consensus picks have historically done very well and have outperformed the market after adjusting for risk.
Hedge fund interest in State Street Corporation (NYSE:STT) shares was flat at the end of last quarter. This is usually a negative indicator. The level and the change in hedge fund popularity aren't the only variables you need to analyze to decipher hedge funds' perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That's why at the end of this article we will examine companies such as Fresenius Medical Care AG & Co. (NYSE:FMS), Cummins Inc. (NYSE:CMI), and Digital Realty Trust, Inc. (NYSE:DLR) to gather more data points.
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 25.8% year to date (through May 30th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 40 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.
We're going to analyze the fresh hedge fund action encompassing State Street Corporation (NYSE:STT).
What have hedge funds been doing with State Street Corporation (NYSE:STT)?
Heading into the second quarter of 2019, a total of 32 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the fourth quarter of 2018. On the other hand, there were a total of 39 hedge funds with a bullish position in STT a year ago. With hedge funds' positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were boosting their stakes substantially (or already accumulated large positions).
Of the funds tracked by Insider Monkey, Yacktman Asset Management, managed by Donald Yacktman, holds the most valuable position in State Street Corporation (NYSE:STT). Yacktman Asset Management has a $171.8 million position in the stock, comprising 2.1% of its 13F portfolio. The second largest stake is held by Citadel Investment Group, managed by Ken Griffin, which holds a $109.8 million position; 0.1% of its 13F portfolio is allocated to the company. Other peers that are bullish contain Mario Gabelli's GAMCO Investors, Israel Englander's Millennium Management and Anthony Bozza's Lakewood Capital Management.
Judging by the fact that State Street Corporation (NYSE:STT) has faced falling interest from the smart money, we can see that there were a few funds who were dropping their entire stakes heading into Q3. Interestingly, Matthew Hulsizer's PEAK6 Capital Management said goodbye to the biggest investment of the "upper crust" of funds monitored by Insider Monkey, valued at about $7 million in stock. David Costen Haley's fund, HBK Investments, also cut its stock, about $4.2 million worth. These bearish behaviors are interesting, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Let's check out hedge fund activity in other stocks - not necessarily in the same industry as State Street Corporation (NYSE:STT) but similarly valued. We will take a look at Fresenius Medical Care AG & Co. (NYSE:FMS), Cummins Inc. (NYSE:CMI), Digital Realty Trust, Inc. (NYSE:DLR), and First Data Corporation (NYSE:FDC). This group of stocks' market caps match STT's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position FMS,7,17048,-1 CMI,42,907637,7 DLR,16,242716,-7 FDC,57,3760286,5 Average,30.5,1231922,1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 30.5 hedge funds with bullish positions and the average amount invested in these stocks was $1232 million. That figure was $720 million in STT's case. First Data Corporation (NYSE:FDC) is the most popular stock in this table. On the other hand Fresenius Medical Care AG & Co. (NYSE:FMS) is the least popular one with only 7 bullish hedge fund positions. State Street Corporation (NYSE:STT) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we'd rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 20 most popular stocks among hedge funds returned 1.9% in Q2 through May 30th and outperformed the S&P 500 ETF (SPY) by more than 3 percentage points. Unfortunately STT wasn't nearly as popular as these 20 stocks and hedge funds that were betting on STT were disappointed as the stock returned -14.5% during the same period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as 13 of these stocks already outperformed the market so far in Q2.
Disclosure: None. This article was originally published at Insider Monkey.