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Is SLCA A Good Stock To Buy Now?

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  • SLCA

Our extensive research has shown that imitating the smart money can generate significant returns for retail investors, which is why we track nearly 817 active prominent money managers and analyze their quarterly 13F filings. The stocks that are heavily bought by hedge funds historically outperformed the market, though there is no shortage of high profile failures like hedge funds' 2018 losses in Facebook and Apple. Let’s take a closer look at what the funds we track think about U.S. Silica Holdings Inc (NYSE:SLCA) in this article.

Is SLCA a good stock to buy now? U.S. Silica Holdings Inc (NYSE:SLCA) shares haven't seen a lot of action during the second quarter. Overall, hedge fund sentiment was unchanged. The stock was in 16 hedge funds' portfolios at the end of September. Our calculations also showed that SLCA isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks). 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 Fly Leasing Ltd (NYSE:FLY), Ruhnn Holding Limited (NASDAQ:RUHN), and GreenPower Motor Company Inc. (NASDAQ:GP) to gather more data points.

Video: Watch our video about the top 5 most popular hedge fund stocks.

Hedge funds' reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn't keep up with the unhedged returns of the market indices. 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 66 percentage points since March 2017 (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.

Peter Algert of Algert Global

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks to pick the best large-cap stocks to buy. 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 let's view the recent hedge fund action regarding U.S. Silica Holdings Inc (NYSE:SLCA).

Do Hedge Funds Think SLCA Is A Good Stock To Buy Now?

At Q3's end, a total of 16 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from the previous quarter. On the other hand, there were a total of 17 hedge funds with a bullish position in SLCA a year ago. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is SLCA A Good Stock To Buy?
Is SLCA A Good Stock To Buy?

According to Insider Monkey's hedge fund database, Ariel Investments, managed by John W. Rogers, holds the number one position in U.S. Silica Holdings Inc (NYSE:SLCA). Ariel Investments has a $26.3 million position in the stock, comprising 0.4% of its 13F portfolio. Sitting at the No. 2 spot is Renaissance Technologies, with a $15.3 million position; less than 0.1%% of its 13F portfolio is allocated to the stock. Remaining hedge funds and institutional investors with similar optimism encompass D. E. Shaw's D E Shaw, Phil Frohlich's Prescott Group Capital Management and Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital. In terms of the portfolio weights assigned to each position Prescott Group Capital Management allocated the biggest weight to U.S. Silica Holdings Inc (NYSE:SLCA), around 1.39% of its 13F portfolio. Ariel Investments is also relatively very bullish on the stock, earmarking 0.38 percent of its 13F equity portfolio to SLCA.

Judging by the fact that U.S. Silica Holdings Inc (NYSE:SLCA) has faced a decline in interest from the smart money, it's safe to say that there was a specific group of hedge funds that elected to cut their positions entirely in the third quarter. At the top of the heap, Donald Sussman's Paloma Partners dumped the biggest position of the 750 funds watched by Insider Monkey, comprising about $0.2 million in stock, and Michael Gelband's ExodusPoint Capital was right behind this move, as the fund dumped about $0.1 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).

Let's check out hedge fund activity in other stocks - not necessarily in the same industry as U.S. Silica Holdings Inc (NYSE:SLCA) but similarly valued. These stocks are Fly Leasing Ltd (NYSE:FLY), Ruhnn Holding Limited (NASDAQ:RUHN), GreenPower Motor Company Inc. (NASDAQ:GP), Matrix Service Co (NASDAQ:MTRX), NN, Inc. (NASDAQ:NNBR), Retractable Technologies, Inc. (NYSE:RVP), and Tuscan Holdings Corp. II (NASDAQ:THCA). This group of stocks' market caps are closest to SLCA's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position FLY,7,12567,-3 RUHN,3,595,1 GP,2,1296,2 MTRX,14,13844,0 NNBR,5,24506,0 RVP,5,12128,1 THCA,8,33185,0 Average,6.3,14017,0.1 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 6.3 hedge funds with bullish positions and the average amount invested in these stocks was $14 million. That figure was $58 million in SLCA's case. Matrix Service Co (NASDAQ:MTRX) is the most popular stock in this table. On the other hand GreenPower Motor Company Inc. (NASDAQ:GP) is the least popular one with only 2 bullish hedge fund positions. Compared to these stocks U.S. Silica Holdings Inc (NYSE:SLCA) is more popular among hedge funds. Our overall hedge fund sentiment score for SLCA is 66.2. 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 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks returned 30.7% in 2020 through December 14th but still managed to beat the market by 15.8 percentage points. Hedge funds were also right about betting on SLCA as the stock returned 103.3% since the end of September (through 12/14) 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.

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