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Is SCI Stock A Buy or Sell?

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  • SCI
  • ^GSPC

A whopping number of 13F filings filed with U.S. Securities and Exchange Commission has been processed by Insider Monkey so that individual investors can look at the overall hedge fund sentiment towards the stocks included in their watchlists. These freshly-submitted public filings disclose money managers’ equity positions as of the end of the three-month period that ended December 31st, so let’s proceed with the discussion of the hedge fund sentiment on Service Corporation International (NYSE:SCI).

Is SCI stock a buy or sell? Service Corporation International (NYSE:SCI) has experienced a decrease in support from the world's most elite money managers recently. Service Corporation International (NYSE:SCI) was in 28 hedge funds' portfolios at the end of the fourth quarter of 2020. The all time high for this statistic is 37. Our calculations also showed that SCI isn't among the 30 most popular stocks among hedge funds (click for Q4 rankings).

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey's monthly stock picks returned 197% since March 2017 and outperformed the S&P 500 ETFs by more than 124 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Billionaire David Siegel's Top 10 Stock Picks
Billionaire David Siegel's Top 10 Stock Picks

David Siegel of Two Sigma Advisors

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. Keeping this in mind let's take a look at the fresh hedge fund action regarding Service Corporation International (NYSE:SCI).

Do Hedge Funds Think SCI Is A Good Stock To Buy Now?

At Q4's end, a total of 28 of the hedge funds tracked by Insider Monkey were long this stock, a change of -7% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in SCI over the last 22 quarters. With the smart money's sentiment swirling, there exists a select group of noteworthy hedge fund managers who were upping their stakes substantially (or already accumulated large positions).

More specifically, Select Equity Group was the largest shareholder of Service Corporation International (NYSE:SCI), with a stake worth $643.1 million reported as of the end of December. Trailing Select Equity Group was Two Sigma Advisors, which amassed a stake valued at $38.3 million. Arrowstreet Capital, Renaissance Technologies, and Millennium Management 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 Select Equity Group allocated the biggest weight to Service Corporation International (NYSE:SCI), around 2.64% of its 13F portfolio. PDT Partners is also relatively very bullish on the stock, dishing out 0.35 percent of its 13F equity portfolio to SCI.

Since Service Corporation International (NYSE:SCI) has experienced declining sentiment from the entirety of the hedge funds we track, it's easy to see that there were a few fund managers that decided to sell off their full holdings heading into Q1. It's worth mentioning that Dmitry Balyasny's Balyasny Asset Management sold off the largest position of the "upper crust" of funds followed by Insider Monkey, totaling about $2.2 million in stock, and Ben Levine, Andrew Manuel and Stefan Renold's LMR Partners was right behind this move, as the fund said goodbye to about $0.4 million worth. These transactions are interesting, as aggregate hedge fund interest dropped by 2 funds heading into Q1.

Let's go over hedge fund activity in other stocks similar to Service Corporation International (NYSE:SCI). These stocks are Smartsheet Inc. (NYSE:SMAR), Ozon Holdings PLC (NASDAQ:OZON), RenaissanceRe Holdings Ltd. (NYSE:RNR), Lamar Advertising Company (NASDAQ:LAMR), Inphi Corporation (NASDAQ:IPHI), Carlisle Companies, Inc. (NYSE:CSL), and Gentex Corporation (NASDAQ:GNTX). This group of stocks' market values are closest to SCI's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position SMAR,45,1723390,0 OZON,21,150922,21 RNR,39,669309,2 LAMR,36,528338,-1 IPHI,34,1272318,0 CSL,17,192963,-11 GNTX,36,665709,-4 Average,32.6,743278,1 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 32.6 hedge funds with bullish positions and the average amount invested in these stocks was $743 million. That figure was $815 million in SCI's case. Smartsheet Inc. (NYSE:SMAR) is the most popular stock in this table. On the other hand Carlisle Companies, Inc. (NYSE:CSL) is the least popular one with only 17 bullish hedge fund positions. Service Corporation International (NYSE:SCI) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for SCI is 45.3. 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. This is a slightly negative signal and we'd rather spend our time researching stocks that hedge funds are piling on. 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 surpassed the market again by 0.9 percentage points. Unfortunately SCI wasn't nearly as popular as these 30 stocks (hedge fund sentiment was quite bearish); SCI investors were disappointed as the stock returned 5.1% since the end of December (through 4/19) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 30 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.

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Disclosure: None. This article was originally published at Insider Monkey.

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