It was a rough fourth quarter for many hedge funds, which were naturally unable to overcome the big dip in the broad market, as the S&P 500 fell by about 4.8% during 2018 and average hedge fund losing about 1%. The Russell 2000, composed of smaller companies, performed even worse, trailing the S&P by more than 6 percentage points, as investors fled less-known quantities for safe havens. Luckily hedge funds were shifting their holdings into large-cap stocks. The 20 most popular hedge fund stocks actually generated an average return of 24.4% during the first 9 months of 2019 and outperformed the S&P 500 ETF by 4 percentage points. We are done processing the latest 13f filings and in this article we will study how hedge fund sentiment towards Silgan Holdings Inc. (NASDAQ:SLGN) changed during the first quarter.
Silgan Holdings Inc. (NASDAQ:SLGN) has experienced an increase in hedge fund interest recently. SLGN was in 18 hedge funds' portfolios at the end of the second quarter of 2019. There were 15 hedge funds in our database with SLGN positions at the end of the previous quarter. Our calculations also showed that SLGN 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.
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 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. Even if you aren't comfortable with shorting stocks, you should at least avoid initiating long positions in our short portfolio.
Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, 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. Let's take a look at the recent hedge fund action regarding Silgan Holdings Inc. (NASDAQ:SLGN).
What does smart money think about Silgan Holdings Inc. (NASDAQ:SLGN)?
At Q2's end, a total of 18 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 20% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in SLGN over the last 16 quarters. With the smart money's sentiment swirling, there exists a few noteworthy hedge fund managers who were upping their stakes meaningfully (or already accumulated large positions).
According to Insider Monkey's hedge fund database, Amy Minella's Cardinal Capital has the most valuable position in Silgan Holdings Inc. (NASDAQ:SLGN), worth close to $97.6 million, amounting to 3.2% of its total 13F portfolio. Coming in second is Renaissance Technologies, with a $34 million position; less than 0.1%% of its 13F portfolio is allocated to the stock. Other professional money managers with similar optimism comprise Cliff Asness's AQR Capital Management, David Harding's Winton Capital Management and Ken Griffin's Citadel Investment Group.
Consequently, specific money managers have jumped into Silgan Holdings Inc. (NASDAQ:SLGN) headfirst. Laurion Capital Management, managed by Benjamin A. Smith, established the most valuable position in Silgan Holdings Inc. (NASDAQ:SLGN). Laurion Capital Management had $1.3 million invested in the company at the end of the quarter. Michael Gelband's ExodusPoint Capital also made a $1 million investment in the stock during the quarter. The other funds with new positions in the stock are Matthew Hulsizer's PEAK6 Capital Management, Dmitry Balyasny's Balyasny Asset Management, and Ken Griffin's Citadel Investment Group.
Let's now review hedge fund activity in other stocks - not necessarily in the same industry as Silgan Holdings Inc. (NASDAQ:SLGN) but similarly valued. These stocks are Navistar International Corporation (NYSE:NAV), Corelogic Inc (NYSE:CLGX), TCF Financial Corporation (NASDAQ:TCF), and National Health Investors Inc (NYSE:NHI). This group of stocks' market valuations are closest to SLGN's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position NAV,26,1425899,3 CLGX,23,333684,6 TCF,20,193696,-2 NHI,13,134792,1 Average,20.5,522018,2 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 20.5 hedge funds with bullish positions and the average amount invested in these stocks was $522 million. That figure was $211 million in SLGN's case. Navistar International Corporation (NYSE:NAV) is the most popular stock in this table. On the other hand National Health Investors Inc (NYSE:NHI) is the least popular one with only 13 bullish hedge fund positions. Silgan Holdings Inc. (NASDAQ:SLGN) is not the least popular stock in this group but hedge fund interest is still below average. 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 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately SLGN wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); SLGN investors were disappointed as the stock returned -1.5% 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.