Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds' and successful investors' positions as of the end of the first quarter. You can find articles about an individual hedge fund's trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 4.5 years and analyze what the smart money thinks of Steel Connect, Inc. (NASDAQ:STCN) based on that data.
Hedge fund interest in Steel Connect, Inc. (NASDAQ:STCN) 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 Centrus Energy Corp. (NYSE:LEU), Pathfinder Bancorp, Inc. (NASDAQ:PBHC), and Equillium, Inc. (NASDAQ:EQ) to gather more data points. Our calculations also showed that STCN isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks). 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 58 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 36% through May 18th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
[caption id="attachment_530601" align="aligncenter" width="400"] Warren Lichtenstein of Steel Partners[/caption]
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out stocks recommended/scorned by legendary Bill Miller. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind we're going to review the fresh hedge fund action surrounding Steel Connect, Inc. (NASDAQ:STCN).
How have hedgies been trading Steel Connect, Inc. (NASDAQ:STCN)?
At Q1's end, a total of 5 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from the fourth quarter of 2019. By comparison, 5 hedge funds held shares or bullish call options in STCN a year ago. With hedge funds' sentiment swirling, there exists a select group of key hedge fund managers who were adding to their holdings meaningfully (or already accumulated large positions).
The largest stake in Steel Connect, Inc. (NASDAQ:STCN) was held by Steel Partners, which reported holding $13.6 million worth of stock at the end of September. It was followed by Renaissance Technologies with a $1.5 million position. Other investors bullish on the company included Solas Capital Management, GAMCO Investors, and Millennium Management. In terms of the portfolio weights assigned to each position Steel Partners allocated the biggest weight to Steel Connect, Inc. (NASDAQ:STCN), around 6.95% of its 13F portfolio. Solas Capital Management is also relatively very bullish on the stock, earmarking 0.65 percent of its 13F equity portfolio to STCN.
Earlier we told you that the aggregate hedge fund interest in the stock was unchanged and we view this as a negative development. Even though there weren't any hedge funds dumping their holdings during the first quarter, there weren't any hedge funds initiating brand new positions. This indicates that hedge funds, at the very best, perceive this stock as dead money and they haven't identified any viable catalysts that can attract investor attention.
Let's check out hedge fund activity in other stocks similar to Steel Connect, Inc. (NASDAQ:STCN). We will take a look at Centrus Energy Corp. (NYSE:LEU), Pathfinder Bancorp, Inc. (NASDAQ:PBHC), Equillium, Inc. (NASDAQ:EQ), and cbdMD, Inc. (NYSE:YCBD). This group of stocks' market caps are closest to STCN's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position LEU,2,560,0 PBHC,1,2533,0 EQ,3,1024,0 YCBD,1,312,1 Average,1.75,1107,0.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 1.75 hedge funds with bullish positions and the average amount invested in these stocks was $1 million. That figure was $16 million in STCN's case. Equillium, Inc. (NASDAQ:EQ) is the most popular stock in this table. On the other hand Pathfinder Bancorp, Inc. (NASDAQ:PBHC) is the least popular one with only 1 bullish hedge fund positions. Compared to these stocks Steel Connect, Inc. (NASDAQ:STCN) is more popular among hedge funds. 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 8.3% in 2020 through the end of May and still beat the market by 13.2 percentage points. Unfortunately STCN wasn't nearly as popular as these 10 stocks and hedge funds that were betting on STCN were disappointed as the stock returned -30.7% during the second quarter (through the end of May) 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 most of these stocks already outperformed the market in 2020.
Disclosure: None. This article was originally published at Insider Monkey.