We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (read our latest 10 coronavirus predictions).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. We at Insider Monkey have gone over 835 13F filings that hedge funds and prominent investors are required to file by the SEC The 13F filings show the funds' and investors' portfolio positions as of December 31st. In this article, we look at what those funds think of Seagate Technology plc (NASDAQ:STX) based on that data.
Seagate Technology plc (NASDAQ:STX) investors should be aware of an increase in support from the world's most elite money managers in recent months. STX was in 35 hedge funds' portfolios at the end of December. There were 30 hedge funds in our database with STX positions at the end of the previous quarter. Our calculations also showed that STX isn't among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video below for Q3 rankings).
[caption id="attachment_30493" align="aligncenter" width="399"] Jeffrey Ubben of ValueAct Capital[/caption]
We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic's significance before most investors. With all of this in mind we're going to take a gander at the new hedge fund action surrounding Seagate Technology plc (NASDAQ:STX).
What does smart money think about Seagate Technology plc (NASDAQ:STX)?
Heading into the first quarter of 2020, a total of 35 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 17% from the third quarter of 2019. By comparison, 26 hedge funds held shares or bullish call options in STX a year ago. With hedge funds' positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were boosting their holdings meaningfully (or already accumulated large positions).
Of the funds tracked by Insider Monkey, Jeffrey Ubben's ValueAct Capital has the biggest position in Seagate Technology plc (NASDAQ:STX), worth close to $1.8775 billion, accounting for 19% of its total 13F portfolio. On ValueAct Capital's heels is Renaissance Technologies, holding a $400.5 million position; the fund has 0.3% of its 13F portfolio invested in the stock. Remaining peers with similar optimism contain John Overdeck and David Siegel's Two Sigma Advisors, Cliff Asness's AQR Capital Management and Jacob Mitchell's Antipodes Partners. In terms of the portfolio weights assigned to each position ValueAct Capital allocated the biggest weight to Seagate Technology plc (NASDAQ:STX), around 19% of its 13F portfolio. 13D Management is also relatively very bullish on the stock, earmarking 4.49 percent of its 13F equity portfolio to STX.
Consequently, key hedge funds have been driving this bullishness. Woodline Partners, managed by Michael Rockefeller and Karl Kroeker, assembled the most outsized position in Seagate Technology plc (NASDAQ:STX). Woodline Partners had $55.2 million invested in the company at the end of the quarter. John Hurley's Cavalry Asset Management also initiated a $7.6 million position during the quarter. The other funds with new positions in the stock are Tor Minesuk's Mondrian Capital, Minhua Zhang's Weld Capital Management, and David Harding's Winton Capital Management.
Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as Seagate Technology plc (NASDAQ:STX) but similarly valued. These stocks are Loews Corporation (NYSE:L), Huntington Bancshares Incorporated (NASDAQ:HBAN), Cheniere Energy, Inc. (NYSE:LNG), and Arista Networks Inc (NYSE:ANET). This group of stocks' market valuations are closest to STX's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position L,24,213525,-6 HBAN,25,44928,3 LNG,43,3483314,0 ANET,26,284265,3 Average,29.5,1006508,0 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 29.5 hedge funds with bullish positions and the average amount invested in these stocks was $1007 million. That figure was $2827 million in STX's case. Cheniere Energy, Inc. (NYSE:LNG) is the most popular stock in this table. On the other hand Loews Corporation (NYSE:L) is the least popular one with only 24 bullish hedge fund positions. Seagate Technology plc (NASDAQ:STX) 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 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 22.3% in 2020 through March 16th but beat the market by 3.2 percentage points. Unfortunately STX wasn't nearly as popular as these 20 stocks and hedge funds that were betting on STX were disappointed as the stock returned -31.1% during the same time 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 many of these stocks already outperformed the market so far this year.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.