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Is ST Stock A Buy or Sell?

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Debasis Saha
·6 min read
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While the market driven by short-term sentiment influenced by the accommodative interest rate environment in the US, virus news and stimulus spending, many smart money investors are starting to get cautious towards the current bull run since March and hedging or reducing many of their long positions. Some fund managers are betting on Dow hitting 40,000 to generate strong returns. However, as we know, big investors usually buy stocks with strong fundamentals that can deliver gains both in bull and bear markets, which is why we believe we can profit from imitating them. In this article, we are going to take a look at the smart money sentiment surrounding Sensata Technologies Holding plc (NYSE:ST).

Is ST stock a buy? The best stock pickers were cutting their exposure. The number of long hedge fund bets were trimmed by 2 lately. Sensata Technologies Holding plc (NYSE:ST) was in 35 hedge funds' portfolios at the end of December. The all time high for this statistic is 37. Our calculations also showed that ST isn't among the 30 most popular stocks among hedge funds (click for Q4 rankings). There were 37 hedge funds in our database with ST positions at the end of the third quarter.

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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 124 percentage points since March 2017 (see the details here).

Ric Dillon Diamond Hill Capital
Ric Dillon Diamond Hill Capital

Ric Dillon of Diamond Hill Capital

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, the House passed a landmark bill decriminalizing marijuana. So, we are checking out this under the radar cannabis stock right now. We go through lists like the 10 best battery stocks to buy to identify the next stock with 10x upside potential. 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. With all of this in mind we're going to take a glance at the recent hedge fund action surrounding Sensata Technologies Holding plc (NYSE:ST).

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

Heading into the first quarter of 2021, a total of 35 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -5% from the previous quarter. On the other hand, there were a total of 23 hedge funds with a bullish position in ST a year ago. With hedge funds' capital changing hands, there exists an "upper tier" of noteworthy hedge fund managers who were upping their stakes considerably (or already accumulated large positions).

Is ST A Good Stock To Buy?
Is ST A Good Stock To Buy?

Of the funds tracked by Insider Monkey, David Blood and Al Gore's Generation Investment Management has the biggest position in Sensata Technologies Holding plc (NYSE:ST), worth close to $622.9 million, accounting for 2.8% of its total 13F portfolio. Sitting at the No. 2 spot is Select Equity Group, managed by Robert Joseph Caruso, which holds a $332.8 million position; 1.4% of its 13F portfolio is allocated to the stock. Other peers with similar optimism include William B. Gray's Orbis Investment Management, Ric Dillon's Diamond Hill Capital and Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital. In terms of the portfolio weights assigned to each position Generation Investment Management allocated the biggest weight to Sensata Technologies Holding plc (NYSE:ST), around 2.78% of its 13F portfolio. Force Hill Capital Management is also relatively very bullish on the stock, dishing out 2.43 percent of its 13F equity portfolio to ST.

Because Sensata Technologies Holding plc (NYSE:ST) has faced falling interest from the smart money, we can see that there was a specific group of hedgies that decided to sell off their full holdings by the end of the fourth quarter. It's worth mentioning that Phill Gross and Robert Atchinson's Adage Capital Management dumped the biggest stake of all the hedgies watched by Insider Monkey, valued at an estimated $251 million in stock, and Christopher James's Partner Fund Management was right behind this move, as the fund dropped about $8.4 million worth. These moves are important to note, as total hedge fund interest fell by 2 funds by the end of the fourth quarter.

Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as Sensata Technologies Holding plc (NYSE:ST) but similarly valued. These stocks are MKS Instruments, Inc. (NASDAQ:MKSI), Lightspeed POS Inc. (NYSE:LSPD), Bruker Corporation (NASDAQ:BRKR), CF Industries Holdings, Inc. (NYSE:CF), LPL Financial Holdings Inc (NASDAQ:LPLA), Athene Holding Ltd. (NYSE:ATH), and Tata Motors Limited (NYSE:TTM). This group of stocks' market valuations match ST's market valuation.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position MKSI,27,408543,-8 LSPD,20,677464,9 BRKR,23,253001,-8 CF,42,834622,8 LPLA,43,1162142,6 ATH,36,1146379,5 TTM,7,40441,-3 Average,28.3,646085,1.3 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 28.3 hedge funds with bullish positions and the average amount invested in these stocks was $646 million. That figure was $1636 million in ST's case. LPL Financial Holdings Inc (NASDAQ:LPLA) is the most popular stock in this table. On the other hand Tata Motors Limited (NYSE:TTM) is the least popular one with only 7 bullish hedge fund positions. Sensata Technologies Holding plc (NYSE:ST) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for ST is 70.3. 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 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks gained 7.9% in 2021 through April 1st and still beat the market by 0.4 percentage points. Hedge funds were also right about betting on ST as the stock returned 11.1% since the end of Q4 (through 4/1) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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Disclosure: None. This article was originally published at Insider Monkey.

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