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Before we spend countless hours researching a company, we like to analyze what insiders, hedge funds and billionaire investors think of the stock first. This is a necessary first step in our investment process because our research has shown that the elite investors' consensus returns have been exceptional. In the following paragraphs, we find out what the billionaire investors and hedge funds think of Signet Jewelers Limited (NYSE:SIG).
Is SIG a good stock to buy now? Signet Jewelers Limited (NYSE:SIG) has seen an increase in activity from the world's largest hedge funds recently. Signet Jewelers Limited (NYSE:SIG) was in 22 hedge funds' portfolios at the end of the third quarter of 2020. The all time high for this statistic is 55. Our calculations also showed that SIG isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks).
Video: 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 S&P 500 ETFs by 66 percentage points since March 2017 (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.
Robert Pohly of Samlyn Capital
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks to pick the best large-cap stocks to buy. 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 we're going to check out the fresh hedge fund action surrounding Signet Jewelers Limited (NYSE:SIG).
Do Hedge Funds Think SIG Is A Good Stock To Buy Now?
Heading into the fourth quarter of 2020, a total of 22 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 38% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards SIG over the last 21 quarters. With the smart money's capital changing hands, there exists a few key hedge fund managers who were increasing their holdings significantly (or already accumulated large positions).
The largest stake in Signet Jewelers Limited (NYSE:SIG) was held by Select Equity Group, which reported holding $151.1 million worth of stock at the end of September. It was followed by Contrarius Investment Management with a $67 million position. Other investors bullish on the company included D E Shaw, Samlyn Capital, and Arrowstreet Capital. In terms of the portfolio weights assigned to each position Contrarius Investment Management allocated the biggest weight to Signet Jewelers Limited (NYSE:SIG), around 5.85% of its 13F portfolio. Kettle Hill Capital Management is also relatively very bullish on the stock, setting aside 2.18 percent of its 13F equity portfolio to SIG.
As one would reasonably expect, key money managers were breaking ground themselves. Samlyn Capital, managed by Robert Pohly, established the biggest position in Signet Jewelers Limited (NYSE:SIG). Samlyn Capital had $24.1 million invested in the company at the end of the quarter. Ken Heebner's Capital Growth Management also made a $15.1 million investment in the stock during the quarter. The other funds with brand new SIG positions are Andrew Kurita's Kettle Hill Capital Management, Dmitry Balyasny's Balyasny Asset Management, and Israel Englander's Millennium Management.
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Signet Jewelers Limited (NYSE:SIG) but similarly valued. These stocks are Kite Realty Group Trust (NYSE:KRG), Myriad Genetics, Inc. (NASDAQ:MYGN), Usa Compression Partners LP (NYSE:USAC), BioXcel Therapeutics, Inc. (NASDAQ:BTAI), Waddell & Reed Financial, Inc. (NYSE:WDR), Matador Resources Co (NYSE:MTDR), and New York Mortgage Trust, Inc. (NASDAQ:NYMT). This group of stocks' market caps are similar to SIG's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position KRG,7,38413,-3 MYGN,19,190093,-2 USAC,4,6819,1 BTAI,11,75492,-2 WDR,21,116258,-4 MTDR,16,69003,-7 NYMT,19,42322,4 Average,13.9,76914,-1.9 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 13.9 hedge funds with bullish positions and the average amount invested in these stocks was $77 million. That figure was $380 million in SIG's case. Waddell & Reed Financial, Inc. (NYSE:WDR) is the most popular stock in this table. On the other hand Usa Compression Partners LP (NYSE:USAC) is the least popular one with only 4 bullish hedge fund positions. Compared to these stocks Signet Jewelers Limited (NYSE:SIG) is more popular among hedge funds. Our overall hedge fund sentiment score for SIG is 72. 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 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks returned 30.7% in 2020 through December 14th but still managed to beat the market by 15.8 percentage points. Hedge funds were also right about betting on SIG as the stock returned 33.3% since the end of September (through 12/14) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.
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Disclosure: None. This article was originally published at Insider Monkey.