At Insider Monkey, we pore over the filings of nearly 887 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 December 31st. In this article, we will use that wealth of knowledge to determine whether or not Signet Jewelers Limited (NYSE:SIG) makes for a good investment right now.
Is SIG stock a buy? Signet Jewelers Limited (NYSE:SIG) investors should pay attention to an increase in activity from the world's largest hedge funds lately. Signet Jewelers Limited (NYSE:SIG) was in 30 hedge funds' portfolios at the end of December. 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 Q4 rankings).
So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 more than 124 percentage points since March 2017 (see the details here).
Paul Tudor Jones of Tudor Investment Corp
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, we heard that billionaire Peter Thiel is backing this psychedelic-drug startup. So, we are taking a closer look at this space. We go through lists like the 10 best biotech stocks under $10 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. Now we're going to review the latest hedge fund action surrounding Signet Jewelers Limited (NYSE:SIG).
Do Hedge Funds Think SIG Is A Good Stock To Buy Now?
At fourth quarter's end, a total of 30 of the hedge funds tracked by Insider Monkey were long this stock, a change of 36% from the third quarter of 2020. By comparison, 22 hedge funds held shares or bullish call options in SIG a year ago. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Signet Jewelers Limited (NYSE:SIG) was held by Select Equity Group, which reported holding $233 million worth of stock at the end of December. It was followed by Contrarius Investment Management with a $72.1 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 4.47% of its 13F portfolio. MIK Capital is also relatively very bullish on the stock, earmarking 3.47 percent of its 13F equity portfolio to SIG.
Now, key money managers have been driving this bullishness. MIK Capital, managed by Kamyar Khajavi, assembled the largest position in Signet Jewelers Limited (NYSE:SIG). MIK Capital had $8.5 million invested in the company at the end of the quarter. Ken Griffin's Citadel Investment Group also initiated a $3.3 million position during the quarter. The other funds with brand new SIG positions are Donald Sussman's Paloma Partners, Paul Tudor Jones's Tudor Investment Corp, and Michael Gelband's ExodusPoint Capital.
Let's now take a look at hedge fund activity in other stocks similar to Signet Jewelers Limited (NYSE:SIG). These stocks are C4 Therapeutics, Inc. (NASDAQ:CCCC), Personalis, Inc. (NASDAQ:PSNL), Marten Transport, Ltd (NASDAQ:MRTN), XPEL Inc. (NASDAQ:XPEL), Transocean Ltd (NYSE:RIG), Harsco Corporation (NYSE:HSC), and Alexander's, Inc. (NYSE:ALX). This group of stocks' market values are closest to SIG's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CCCC,22,377592,22 PSNL,15,331396,4 MRTN,16,57634,-3 XPEL,12,69469,0 RIG,17,175659,0 HSC,12,31676,-1 ALX,8,109102,-2 Average,14.6,164647,2.9 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 14.6 hedge funds with bullish positions and the average amount invested in these stocks was $165 million. That figure was $511 million in SIG's case. C4 Therapeutics, Inc. (NASDAQ:CCCC) is the most popular stock in this table. On the other hand Alexander's, Inc. (NYSE:ALX) is the least popular one with only 8 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 76.4. 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 returned 12.2% in 2021 through April 12th but still managed to beat the market by 1.5 percentage points. Hedge funds were also right about betting on SIG as the stock returned 141.7% since the end of December (through 4/12) 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.