Hedge funds are not perfect. They have their bad picks just like everyone else. Facebook, a stock hedge funds have loved, lost nearly 40% of its value at one point in 2018. Although hedge funds are not perfect, their consensus picks do deliver solid returns, however. Our data show the top 15 S&P 500 stocks among hedge funds at the end of December 2018 yielded an average return of 19.7% year-to-date, vs. a gain of 13.1% for the S&P 500 Index. Because hedge funds have a lot of resources and their consensus picks do well, we pay attention to what they think. In this article, we analyze what the elite funds think of Stewart Information Services Corp (NYSE:STC).
Is Stewart Information Services Corp (NYSE:STC) an outstanding investment right now? Prominent investors are getting less optimistic. The number of long hedge fund bets went down by 6 in recent months. Our calculations also showed that STC 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 glance at the new hedge fund action regarding Stewart Information Services Corp (NYSE:STC).
How are hedge funds trading Stewart Information Services Corp (NYSE:STC)?
At the end of the fourth quarter, a total of 14 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -30% from one quarter earlier. On the other hand, there were a total of 17 hedge funds with a bullish position in STC a year ago. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Magnetar Capital held the most valuable stake in Stewart Information Services Corp (NYSE:STC), which was worth $44.9 million at the end of the fourth quarter. On the second spot was Renaissance Technologies which amassed $28 million worth of shares. Moreover, Paulson & Co, Millennium Management, and Jet Capital Investors were also bullish on Stewart Information Services Corp (NYSE:STC), allocating a large percentage of their portfolios to this stock.
Because Stewart Information Services Corp (NYSE:STC) has faced falling interest from the smart money, it's safe to say that there lies a certain "tier" of hedgies who were dropping their positions entirely in the third quarter. It's worth mentioning that Glenn Russell Dubin's Highbridge Capital Management dropped the largest position of the 700 funds followed by Insider Monkey, comprising close to $5.4 million in stock. Ben Levine, Andrew Manuel and Stefan Renold's fund, LMR Partners, also dumped its stock, about $5.2 million worth. These moves are important to note, as total hedge fund interest was cut by 6 funds in the third quarter.
Let's now review hedge fund activity in other stocks - not necessarily in the same industry as Stewart Information Services Corp (NYSE:STC) but similarly valued. These stocks are NextGen Healthcare, Inc. (NASDAQ:NXGN), Primoris Services Corp (NASDAQ:PRIM), Piper Jaffray Companies (NYSE:PJC), and SeaDrill Limited (NYSE:SDRL). This group of stocks' market values resemble STC's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position NXGN,15,35036,2 PRIM,9,27023,1 PJC,5,39248,-2 SDRL,22,320606,-2 Average,12.75,105478,-0.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 12.75 hedge funds with bullish positions and the average amount invested in these stocks was $105 million. That figure was $149 million in STC's case. SeaDrill Limited (NYSE:SDRL) is the most popular stock in this table. On the other hand Piper Jaffray Companies (NYSE:PJC) is the least popular one with only 5 bullish hedge fund positions. Stewart Information Services Corp (NYSE:STC) 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 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 STC wasn't nearly as popular as these 15 stock and hedge funds that were betting on STC were disappointed as the stock returned 6.2% 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.