At Insider Monkey, we pore over the filings of nearly 750 top investment firms every quarter, a process we have now completed for the latest reporting period. The data we've gathered as a result gives us access to a wealth of collective knowledge based on these firms' portfolio holdings as of June 28. In this article, we will use that wealth of knowledge to determine whether or not Shaw Communications Inc (NYSE:SJR) makes for a good investment right now.
Hedge fund interest in Shaw Communications Inc (NYSE:SJR) 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 Teledyne Technologies Incorporated (NYSE:TDY), Alleghany Corporation (NYSE:Y), and Avantor, Inc. (NYSE:AVTR) to gather more data points. Our calculations also showed that SJR isn't among the 30 most popular stocks among hedge funds (view the video below). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Hedge funds' reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn't keep up with the unhedged returns of the market indices. Our research has shown that hedge funds' small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
Unlike some fund managers who are betting on Dow reaching 40000 in a year, our long-short investment strategy doesn't rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. We're going to take a glance at the key hedge fund action regarding Shaw Communications Inc (NYSE:SJR).
How are hedge funds trading Shaw Communications Inc (NYSE:SJR)?
At Q2's end, a total of 12 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from the previous quarter. By comparison, 13 hedge funds held shares or bullish call options in SJR a year ago. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Shaw Communications Inc (NYSE:SJR) was held by Citadel Investment Group, which reported holding $170.3 million worth of stock at the end of March. It was followed by Renaissance Technologies with a $76.5 million position. Other investors bullish on the company included Two Sigma Advisors, D E Shaw, and Bridgewater Associates.
Judging by the fact that Shaw Communications Inc (NYSE:SJR) has faced bearish sentiment from hedge fund managers, we can see that there exists a select few hedge funds that elected to cut their full holdings by the end of the second quarter. At the top of the heap, Cliff Asness's AQR Capital Management said goodbye to the largest investment of the "upper crust" of funds watched by Insider Monkey, comprising an estimated $12.7 million in stock, and Israel Englander's Millennium Management was right behind this move, as the fund sold off about $4.6 million worth. These moves are interesting, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).
Let's now review hedge fund activity in other stocks - not necessarily in the same industry as Shaw Communications Inc (NYSE:SJR) but similarly valued. These stocks are Teledyne Technologies Incorporated (NYSE:TDY), Alleghany Corporation (NYSE:Y), Avantor, Inc. (NYSE:AVTR), and Mylan N.V. (NASDAQ:MYL). This group of stocks' market caps match SJR's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position TDY,26,642702,-2 Y,26,361790,3 AVTR,30,1081752,30 MYL,30,1601252,0 Average,28,921874,7.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 28 hedge funds with bullish positions and the average amount invested in these stocks was $922 million. That figure was $287 million in SJR's case. Avantor, Inc. (NYSE:AVTR) is the most popular stock in this table. On the other hand Teledyne Technologies Incorporated (NYSE:TDY) is the least popular one with only 26 bullish hedge fund positions. Compared to these stocks Shaw Communications Inc (NYSE:SJR) is even less popular than TDY. Hedge funds dodged a bullet by taking a bearish stance towards SJR. Our calculations showed that the top 20 most popular hedge fund stocks returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately SJR wasn't nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); SJR investors were disappointed as the stock returned -2.4% during the third quarter 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 in 2019.
Disclosure: None. This article was originally published at Insider Monkey.