The government requires hedge funds and wealthy investors that crossed the $100 million equity holdings threshold are required to file a report that shows their positions at the end of every quarter. Even though it isn't the intention, these filings level the playing field for ordinary investors. The latest round of 13F filings disclosed the funds' positions on December 31. We at Insider Monkey have made an extensive database of nearly 750 of those elite funds and prominent investors' filings. In this article, we analyze how these elite funds and prominent investors traded Simpson Manufacturing Co, Inc. (NYSE:SSD) based on those filings.
Hedge fund interest in Simpson Manufacturing Co, Inc. (NYSE:SSD) 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 Valmont Industries, Inc. (NYSE:VMI), CNO Financial Group Inc (NYSE:CNO), and Colfax Corporation (NYSE:CFX) to gather more data points.
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 32 percentage points since May 2014 through March 12, 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.
Let's take a look at the new hedge fund action encompassing Simpson Manufacturing Co, Inc. (NYSE:SSD).
Hedge fund activity in Simpson Manufacturing Co, Inc. (NYSE:SSD)
At Q4's end, a total of 17 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards SSD over the last 14 quarters. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Simpson Manufacturing Co, Inc. (NYSE:SSD) was held by Ariel Investments, which reported holding $99.3 million worth of stock at the end of September. It was followed by Royce & Associates with a $38.7 million position. Other investors bullish on the company included Millennium Management, Renaissance Technologies, and Citadel Investment Group.
Due to the fact that Simpson Manufacturing Co, Inc. (NYSE:SSD) has experienced a decline in interest from hedge fund managers, it's easy to see that there exists a select few funds that decided to sell off their entire stakes by the end of the third quarter. Interestingly, Ed Bosek's BeaconLight Capital sold off the biggest stake of the "upper crust" of funds tracked by Insider Monkey, totaling close to $11.7 million in stock. Peter Rathjens, Bruce Clarke and John Campbell's fund, Arrowstreet Capital, also dumped its stock, about $6 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).
Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as Simpson Manufacturing Co, Inc. (NYSE:SSD) but similarly valued. These stocks are Valmont Industries, Inc. (NYSE:VMI), CNO Financial Group Inc (NYSE:CNO), Colfax Corporation (NYSE:CFX), and Omnicell, Inc. (NASDAQ:OMCL). 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 VMI,18,203426,1 CNO,11,104672,-3 CFX,27,333618,7 OMCL,13,64252,8 Average,17.25,176492,3.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 17.25 hedge funds with bullish positions and the average amount invested in these stocks was $176 million. That figure was $190 million in SSD's case. Colfax Corporation (NYSE:CFX) is the most popular stock in this table. On the other hand CNO Financial Group Inc (NYSE:CNO) is the least popular one with only 11 bullish hedge fund positions. Simpson Manufacturing Co, Inc. (NYSE:SSD) 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 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. Unfortunately SSD wasn't nearly as popular as these 15 stock (hedge fund sentiment was quite bearish); SSD investors were disappointed as the stock returned 16.5% and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 15 most popular stocks) among hedge funds as 13 of these stocks already outperformed the market this year.
Disclosure: None. This article was originally published at Insider Monkey.
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