Our extensive research has shown that imitating the smart money can generate significant returns for retail investors, which is why we track nearly 750 active prominent money managers and analyze their quarterly 13F filings. The stocks that are heavily bought by hedge funds historically outperformed the market, though there is no shortage of high profile failures like hedge funds' 2018 losses in Facebook and Apple. Let’s take a closer look at what the funds we track think about Store Capital Corporation (NYSE:STOR) in this article.
Store Capital Corporation (NYSE:STOR) shares haven't seen a lot of action during the second quarter. Overall, hedge fund sentiment was unchanged. The stock was in 22 hedge funds' portfolios at the end of the second quarter of 2019. At the end of this article we will also compare STOR to other stocks including Alliance Data Systems Corporation (NYSE:ADS), Telecom Argentina S.A. (NYSE:TEO), and Neurocrine Biosciences, Inc. (NASDAQ:NBIX) to get a better sense of its popularity. Our calculations also showed that STOR isn't among the 30 most popular stocks among hedge funds (see the video below). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 40 percentage points since May 2014 through May 30, 2019 (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. Even if you aren't comfortable with shorting stocks, you should at least avoid initiating long positions in our short portfolio.
Unlike this former hedge fund manager who is convinced Dow will soar past 40000, our long-short investment strategy doesn't rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. We're going to view the key hedge fund action regarding Store Capital Corporation (NYSE:STOR).
How have hedgies been trading Store Capital Corporation (NYSE:STOR)?
At Q2's end, a total of 22 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from the first quarter of 2019. Below, you can check out the change in hedge fund sentiment towards STOR over the last 16 quarters. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Berkshire Hathaway was the largest shareholder of Store Capital Corporation (NYSE:STOR), with a stake worth $618.1 million reported as of the end of March. Trailing Berkshire Hathaway was AEW Capital Management, which amassed a stake valued at $96.1 million. Millennium Management, Citadel Investment Group, and Two Sigma Advisors were also very fond of the stock, giving the stock large weights in their portfolios.
Due to the fact that Store Capital Corporation (NYSE:STOR) has witnessed falling interest from the entirety of the hedge funds we track, we can see that there is a sect of fund managers that decided to sell off their positions entirely heading into Q3. Intriguingly, David Costen Haley's HBK Investments dumped the largest investment of all the hedgies followed by Insider Monkey, valued at an estimated $1.3 million in stock. Michael Platt and William Reeves's fund, BlueCrest Capital Mgmt., also said goodbye to its stock, about $0.8 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).
Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as Store Capital Corporation (NYSE:STOR) but similarly valued. These stocks are Alliance Data Systems Corporation (NYSE:ADS), Telecom Argentina S.A. (NYSE:TEO), Neurocrine Biosciences, Inc. (NASDAQ:NBIX), and Kohl's Corporation (NYSE:KSS). This group of stocks' market valuations resemble STOR's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position ADS,34,1420142,-4 TEO,3,54171,-6 NBIX,34,1237372,-1 KSS,29,550214,2 Average,25,815475,-2.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 25 hedge funds with bullish positions and the average amount invested in these stocks was $815 million. That figure was $988 million in STOR's case. Alliance Data Systems Corporation (NYSE:ADS) is the most popular stock in this table. On the other hand Telecom Argentina S.A. (NYSE:TEO) is the least popular one with only 3 bullish hedge fund positions. Store Capital Corporation (NYSE:STOR) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. A small number of hedge funds were also right about betting on STOR as the stock returned 13.8% during the same time frame and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.