Looking for stocks with high upside potential? Just follow the big players within the hedge fund industry. Why should you do so? Let’s take a brief look at what statistics have to say about hedge funds’ stock picking abilities to illustrate. The Standard and Poor’s 500 Index returned approximately 26% in 2019 (through November 22nd). Conversely, hedge funds’ 20 preferred S&P 500 stocks generated a return of nearly 35% during the same period, with the majority of these stock picks outperforming the broader market benchmark. Coincidence? It might happen to be so, but it is unlikely. Our research covering the last 18 years indicates that hedge funds' consensus stock picks generate superior risk-adjusted returns. That's why we believe it is wise to check hedge fund activity before you invest your time or your savings on a stock like SEI Investments Company (NASDAQ:SEIC).
SEI Investments Company (NASDAQ:SEIC) was in 23 hedge funds' portfolios at the end of the third quarter of 2019. SEIC has experienced an increase in activity from the world's largest hedge funds of late. There were 22 hedge funds in our database with SEIC positions at the end of the previous quarter. Our calculations also showed that SEIC isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
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 flagship best performing hedge funds strategy returned 91% since May 2014 and outperformed the Russell 2000 ETFs by nearly 40 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.
[caption id="attachment_745225" align="aligncenter" width="473"] Noam Gottesman of GLG Partners[/caption]
Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world's most bearish hedge fund that's more convinced than ever that a crash is coming, our long-short investment strategy doesn't rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds' buy/sell signals. We're going to take a gander at the key hedge fund action encompassing SEI Investments Company (NASDAQ:SEIC).
How are hedge funds trading SEI Investments Company (NASDAQ:SEIC)?
At the end of the third quarter, a total of 23 of the hedge funds tracked by Insider Monkey were long this stock, a change of 5% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards SEIC over the last 17 quarters. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to Insider Monkey's hedge fund database, Citadel Investment Group, managed by Ken Griffin, holds the largest position in SEI Investments Company (NASDAQ:SEIC). Citadel Investment Group has a $105.3 million position in the stock, comprising less than 0.1%% of its 13F portfolio. On Citadel Investment Group's heels is Renaissance Technologies, which holds a $58 million position; less than 0.1%% of its 13F portfolio is allocated to the stock. Some other members of the smart money that hold long positions comprise Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital, Noam Gottesman's GLG Partners and Chuck Royce's Royce & Associates. In terms of the portfolio weights assigned to each position Goodnow Investment Group allocated the biggest weight to SEI Investments Company (NASDAQ:SEIC), around 2.9% of its 13F portfolio. Weld Capital Management is also relatively very bullish on the stock, earmarking 0.42 percent of its 13F equity portfolio to SEIC.
Consequently, key money managers were breaking ground themselves. Fisher Asset Management, managed by Ken Fisher, established the most outsized position in SEI Investments Company (NASDAQ:SEIC). Fisher Asset Management had $6.1 million invested in the company at the end of the quarter. Paul Tudor Jones's Tudor Investment Corp also initiated a $0.6 million position during the quarter. The only other fund with a brand new SEIC position is Ken Griffin's Citadel Investment Group.
Let's now review hedge fund activity in other stocks similar to SEI Investments Company (NASDAQ:SEIC). These stocks are Mohawk Industries, Inc. (NYSE:MHK), Crown Holdings, Inc. (NYSE:CCK), Beyond Meat, Inc. (NASDAQ:BYND), and Alnylam Pharmaceuticals, Inc. (NASDAQ:ALNY). All of these stocks' market caps resemble SEIC's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position MHK,32,1522732,-1 CCK,42,1266913,7 BYND,17,92936,1 ALNY,29,779948,-6 Average,30,915632,0.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 30 hedge funds with bullish positions and the average amount invested in these stocks was $916 million. That figure was $390 million in SEIC's case. Crown Holdings, Inc. (NYSE:CCK) is the most popular stock in this table. On the other hand Beyond Meat, Inc. (NASDAQ:BYND) is the least popular one with only 17 bullish hedge fund positions. SEI Investments Company (NASDAQ:SEIC) 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 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. A small number of hedge funds were also right about betting on SEIC, though not to the same extent, as the stock returned 8.9% during the first two months of the fourth quarter and outperformed the market.
Disclosure: None. This article was originally published at Insider Monkey.