With the third-quarter round of 13F filings behind us it is time to take a look at the stocks in which some of the best money managers in the world preferred to invest or sell heading into the fourth quarter. One of these stocks was Sinopec Shanghai Petrochemical Co. (NYSE:SHI).
Is Sinopec Shanghai Petrochemical Co. (NYSE:SHI) a buy here? The best stock pickers are getting more optimistic. The number of long hedge fund bets rose by 2 in recent months. Our calculations also showed that SHI isn't among the 30 most popular stocks among hedge funds. SHI was in 6 hedge funds' portfolios at the end of September. There were 4 hedge funds in our database with SHI holdings at the end of the previous quarter.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds' large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 18 percentage points since May 2014 through December 3, 2018 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 24% through December 3, 2018. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Let's go over the new hedge fund action regarding Sinopec Shanghai Petrochemical Co. (NYSE:SHI).
Hedge fund activity in Sinopec Shanghai Petrochemical Co. (NYSE:SHI)
At the end of the third quarter, a total of 6 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 50% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in SHI over the last 13 quarters. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Renaissance Technologies held the most valuable stake in Sinopec Shanghai Petrochemical Co. (NYSE:SHI), which was worth $10.4 million at the end of the third quarter. On the second spot was Millennium Management which amassed $2.6 million worth of shares. Moreover, Sensato Capital Management, Arrowstreet Capital, and Citadel Investment Group were also bullish on Sinopec Shanghai Petrochemical Co. (NYSE:SHI), allocating a large percentage of their portfolios to this stock.
With a general bullishness amongst the heavyweights, specific money managers have jumped into Sinopec Shanghai Petrochemical Co. (NYSE:SHI) headfirst. Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, assembled the largest position in Sinopec Shanghai Petrochemical Co. (NYSE:SHI). Arrowstreet Capital had $0.9 million invested in the company at the end of the quarter. Matthew Tewksbury's Stevens Capital Management also made a $0.2 million investment in the stock during the quarter.
Let's check out hedge fund activity in other stocks - not necessarily in the same industry as Sinopec Shanghai Petrochemical Co. (NYSE:SHI) but similarly valued. These stocks are Oaktree Capital Group LLC (NYSE:OAK), Huntsman Corporation (NYSE:HUN), Masimo Corporation (NASDAQ:MASI), and Crown Holdings, Inc. (NYSE:CCK). This group of stocks' market caps are closest to SHI's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position OAK,7,197717,-2 HUN,31,824128,0 MASI,28,503409,-1 CCK,33,901924,6 Average,24.75,606795,0.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 24.75 hedge funds with bullish positions and the average amount invested in these stocks was $607 million. That figure was $16 million in SHI's case. Crown Holdings, Inc. (NYSE:CCK) is the most popular stock in this table. On the other hand Oaktree Capital Group LLC (NYSE:OAK) is the least popular one with only 7 bullish hedge fund positions. Compared to these stocks Sinopec Shanghai Petrochemical Co. (NYSE:SHI) is even less popular than OAK. Considering that hedge funds aren't fond of this stock in relation to other companies analyzed in this article, it may be a good idea to analyze it in detail and understand why the smart money isn't behind this stock. This isn't necessarily bad news. Although it is possible that hedge funds may think the stock is overpriced and view the stock as a short candidate, they may not be very familiar with the bullish thesis. In either case more research is warranted.
Disclosure: None. This article was originally published at Insider Monkey.