The latest 13F reporting period has come and gone, and Insider Monkey have plowed through 823 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds' and investors' portfolio positions as of June 30th, when the S&P 500 Index was trading around the 3100 level. Since the end of March, investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned more than 50% since its bottom. In this article you are going to find out whether hedge funds thought Steelcase Inc. (NYSE:SCS) was a good investment heading into the third quarter and how the stock traded in comparison to the top hedge fund picks.
Is Steelcase Inc. (NYSE:SCS) the right investment to pursue these days? Prominent investors were becoming less hopeful. The number of long hedge fund bets retreated by 1 lately. Steelcase Inc. (NYSE:SCS) was in 22 hedge funds' portfolios at the end of the second quarter of 2020. The all time high for this statistics is 30. Our calculations also showed that SCS isn't among the 30 most popular stocks among hedge funds (click for Q2 rankings and see the video for a quick look at the top 5 stocks). There were 23 hedge funds in our database with SCS positions at the end of the first quarter. Video: 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 a select group of hedge fund holdings outperformed the S&P 500 ETFs by 56 percentage points since March 2017 (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 34% through August 17th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Fred DiSanto of Ancora Advisors
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost precious metals prices. So, we are checking out this lithium company which could also benefit from the electric car adoption. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website to get excerpts of these letters in your inbox. Now we're going to analyze the latest hedge fund action encompassing Steelcase Inc. (NYSE:SCS).
What have hedge funds been doing with Steelcase Inc. (NYSE:SCS)?
At second quarter's end, a total of 22 of the hedge funds tracked by Insider Monkey were long this stock, a change of -4% from one quarter earlier. On the other hand, there were a total of 19 hedge funds with a bullish position in SCS a year ago. With the smart money's capital changing hands, there exists a select group of noteworthy hedge fund managers who were boosting their stakes substantially (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, Renaissance Technologies has the largest position in Steelcase Inc. (NYSE:SCS), worth close to $18.6 million, accounting for less than 0.1%% of its total 13F portfolio. The second most bullish fund manager is Pzena Investment Management, managed by Richard S. Pzena, which holds a $18 million position; the fund has 0.1% of its 13F portfolio invested in the stock. Some other hedge funds and institutional investors that are bullish include Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital, D. E. Shaw's D E Shaw and John Overdeck and David Siegel's Two Sigma Advisors. In terms of the portfolio weights assigned to each position Cumberland Associates / Springowl Associates allocated the biggest weight to Steelcase Inc. (NYSE:SCS), around 2.9% of its 13F portfolio. Pzena Investment Management is also relatively very bullish on the stock, designating 0.12 percent of its 13F equity portfolio to SCS.
Judging by the fact that Steelcase Inc. (NYSE:SCS) has experienced a decline in interest from the aggregate hedge fund industry, we can see that there exists a select few hedge funds that elected to cut their entire stakes last quarter. Interestingly, Brandon Haley's Holocene Advisors dropped the biggest position of the 750 funds monitored by Insider Monkey, worth close to $0.8 million in stock, and Farnum Brown and Adam Seitchik's Arjuna Capital was right behind this move, as the fund dumped about $0.4 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest was cut by 1 funds last quarter.
Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as Steelcase Inc. (NYSE:SCS) but similarly valued. We will take a look at Marten Transport, Ltd (NASDAQ:MRTN), Urban Edge Properties (NYSE:UE), Grupo Financiero Galicia S.A. (NASDAQ:GGAL), Two Harbors Investment Corp (NYSE:TWO), Skyline Champion Corporation (NYSE:SKY), Methanex Corporation (NASDAQ:MEOH), and GreenTree Hospitality Group Ltd. (NYSE:GHG). All of these stocks' market caps resemble SCS's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position MRTN,19,63328,3 UE,25,104705,4 GGAL,11,32517,5 TWO,16,44443,-8 SKY,23,206283,0 MEOH,17,74700,5 GHG,5,24114,1 Average,16.6,78584,1.4 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 16.6 hedge funds with bullish positions and the average amount invested in these stocks was $79 million. That figure was $89 million in SCS's case. Urban Edge Properties (NYSE:UE) is the most popular stock in this table. On the other hand GreenTree Hospitality Group Ltd. (NYSE:GHG) is the least popular one with only 5 bullish hedge fund positions. Steelcase Inc. (NYSE:SCS) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for SCS is 68.5. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. 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 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 24.8% in 2020 through the end of September and beat the market by 19.3 percentage points. Unfortunately SCS wasn't nearly as popular as these 10 stocks and hedge funds that were betting on SCS were disappointed as the stock returned -15.4% in Q3 and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
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Disclosure: None. This article was originally published at Insider Monkey.