The market has been volatile in the last few months as the Federal Reserve continued its rate cuts and uncertainty looms over trade negotiations with China. Small cap stocks have been hit hard as a result, as the Russell 2000 ETF (IWM) has underperformed the larger S&P 500 ETF (SPY) by more than 10 percentage points over the last 12 months. SEC filings and hedge fund investor letters indicate that the smart money seems to be paring back their overall long exposure since summer months, though some funds increased their exposure dramatically at the end of Q2 and the beginning of Q3. In this article, we analyze what the smart money thinks of Simpson Manufacturing Co, Inc. (NYSE:SSD) and find out how it is affected by hedge funds' moves.
Is Simpson Manufacturing Co, Inc. (NYSE:SSD) worth your attention right now? Prominent investors are in a pessimistic mood. The number of long hedge fund positions were trimmed by 2 recently. Our calculations also showed that SSD 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.
To most market participants, hedge funds are seen as underperforming, old financial tools of the past. While there are greater than 8000 funds trading today, Our experts look at the crème de la crème of this club, around 750 funds. It is estimated that this group of investors manage bulk of the hedge fund industry's total asset base, and by tailing their first-class picks, Insider Monkey has uncovered various investment strategies that have historically defeated the S&P 500 index. Insider Monkey's flagship hedge fund strategy exceeded the S&P 500 index by around 5 percentage points per year since its inception in May 2014. We were able to generate large returns even by identifying short candidates. Our portfolio of short stocks lost 25.7% since February 2017 (through September 30th) even though the market was up more than 33% during the same period. We just shared a list of 10 short targets in our latest quarterly update .
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. We're going to go over the fresh hedge fund action regarding Simpson Manufacturing Co, Inc. (NYSE:SSD).
What have hedge funds been doing with Simpson Manufacturing Co, Inc. (NYSE:SSD)?
Heading into the third quarter of 2019, a total of 17 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -11% from the previous quarter. On the other hand, there were a total of 15 hedge funds with a bullish position in SSD 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.
More specifically, Ariel Investments was the largest shareholder of Simpson Manufacturing Co, Inc. (NYSE:SSD), with a stake worth $112.6 million reported as of the end of March. Trailing Ariel Investments was Royce & Associates, which amassed a stake valued at $50 million. Arrowstreet Capital, Millennium Management, and Fisher Asset Management were also very fond of the stock, giving the stock large weights in their portfolios.
Judging by the fact that Simpson Manufacturing Co, Inc. (NYSE:SSD) has faced bearish sentiment from hedge fund managers, logic holds that there was a specific group of hedgies that decided to sell off their entire stakes in the second quarter. Intriguingly, Joel Greenblatt's Gotham Asset Management cut the largest investment of the "upper crust" of funds tracked by Insider Monkey, comprising close to $2 million in stock. Paul Marshall and Ian Wace's fund, Marshall Wace LLP, also dropped its stock, about $1.2 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest was cut by 2 funds in the second quarter.
Let's go over hedge fund activity in other stocks similar to Simpson Manufacturing Co, Inc. (NYSE:SSD). These stocks are Kennedy-Wilson Holdings Inc (NYSE:KW), Kennametal Inc. (NYSE:KMT), Monro, Inc. (NASDAQ:MNRO), and Old National Bancorp (NASDAQ:ONB). All of these stocks' market caps are similar to SSD's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position KW,13,468473,-1 KMT,20,321757,0 MNRO,14,237151,-3 ONB,10,19875,1 Average,14.25,261814,-0.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 14.25 hedge funds with bullish positions and the average amount invested in these stocks was $262 million. That figure was $228 million in SSD's case. Kennametal Inc. (NYSE:KMT) is the most popular stock in this table. On the other hand Old National Bancorp (NASDAQ:ONB) is the least popular one with only 10 bullish hedge fund positions. Simpson Manufacturing Co, Inc. (NYSE:SSD) is not the most popular stock in this group but hedge fund interest is still above average. 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. Hedge funds were also right about betting on SSD, though not to the same extent, as the stock returned 4.7% during the third quarter and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.