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We know that hedge funds generate strong, risk-adjusted returns over the long run, therefore imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, smart money investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn't mean that they don't have occasional colossal losses; they do (like Melvin Capital's recent GameStop losses). However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, as the current round of 13F filings has just ended, let’s examine the smart money sentiment towards Southern Copper Corporation (NYSE:SCCO).
Is SCCO stock a buy? The smart money was becoming less hopeful. The number of bullish hedge fund bets were cut by 4 in recent months. Southern Copper Corporation (NYSE:SCCO) was in 23 hedge funds' portfolios at the end of December. The all time high for this statistic is 27. Our calculations also showed that SCCO isn't among the 30 most popular stocks among hedge funds (click for Q4 rankings). There were 27 hedge funds in our database with SCCO positions at the end of the third quarter.
In the 21st century investor’s toolkit there are a large number of methods stock market investors use to grade their holdings. A duo of the best methods are hedge fund and insider trading indicators. Our experts have shown that, historically, those who follow the best picks of the elite investment managers can trounce the S&P 500 by a significant amount (see the details here). Also, our monthly newsletter's portfolio of long stock picks returned 197% since March 2017 (through March 2021) and beat the S&P 500 Index by 124 percentage points. You can download a sample issue of this newsletter on our website .
Paul Marshall of Marshall Wace
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, auto parts business is a recession resistant business, so we are taking a closer look at this discount auto parts stock that is growing at a 196% annualized rate. We go through lists like the 15 best micro-cap stocks to buy now to identify the next stock with 10x upside potential. 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. With all of this in mind let's go over the recent hedge fund action encompassing Southern Copper Corporation (NYSE:SCCO).
Do Hedge Funds Think SCCO Is A Good Stock To Buy Now?
At Q4's end, a total of 23 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -15% from the third quarter of 2020. On the other hand, there were a total of 20 hedge funds with a bullish position in SCCO 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 upping their stakes considerably (or already accumulated large positions).
Among these funds, Fisher Asset Management held the most valuable stake in Southern Copper Corporation (NYSE:SCCO), which was worth $274.2 million at the end of the fourth quarter. On the second spot was Arrowstreet Capital which amassed $164.6 million worth of shares. Marshall Wace LLP, D E Shaw, and Moore Global Investments were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Qtron Investments allocated the biggest weight to Southern Copper Corporation (NYSE:SCCO), around 0.56% of its 13F portfolio. Hosking Partners is also relatively very bullish on the stock, earmarking 0.4 percent of its 13F equity portfolio to SCCO.
Due to the fact that Southern Copper Corporation (NYSE:SCCO) has witnessed falling interest from the smart money, it's easy to see that there exists a select few hedgies that decided to sell off their entire stakes by the end of the fourth quarter. Interestingly, Israel Englander's Millennium Management dumped the biggest investment of the "upper crust" of funds followed by Insider Monkey, comprising close to $5.9 million in stock. Claes Fornell's fund, CSat Investment Advisory, also dumped its stock, about $2.4 million worth. These bearish behaviors are interesting, as total hedge fund interest dropped by 4 funds by the end of the fourth quarter.
Let's also examine hedge fund activity in other stocks similar to Southern Copper Corporation (NYSE:SCCO). We will take a look at Waste Management, Inc. (NYSE:WM), Koninklijke Philips NV (NYSE:PHG), Bank of Montreal (NYSE:BMO), Monster Beverage Corp (NASDAQ:MNST), Honda Motor Co Ltd (NYSE:HMC), America Movil SAB de CV (NYSE:AMX), and Aon plc (NYSE:AON). This group of stocks' market caps resemble SCCO's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position WM,37,2937888,-1 PHG,8,53896,-2 BMO,11,45889,1 MNST,44,2837202,-6 HMC,12,393981,1 AMX,16,169899,1 AON,63,5799552,11 Average,27.3,1748330,0.7 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 27.3 hedge funds with bullish positions and the average amount invested in these stocks was $1748 million. That figure was $572 million in SCCO's case. Aon plc (NYSE:AON) is the most popular stock in this table. On the other hand Koninklijke Philips NV (NYSE:PHG) is the least popular one with only 8 bullish hedge fund positions. Southern Copper Corporation (NYSE:SCCO) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for SCCO is 40.2. 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. Our calculations showed that top 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks gained 12.3% in 2021 through April 19th and still beat the market by 0.9 percentage points. A small number of hedge funds were also right about betting on SCCO as the stock returned 15.4% since the end of the fourth quarter (through 4/19) and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.