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Many investors, including Paul Tudor Jones or Stan Druckenmiller, have been saying before the Q4 market crash that the stock market is overvalued due to a low interest rate environment that leads to companies swapping their equity for debt and focusing mostly on short-term performance such as beating the quarterly earnings estimates. In the first half of 2019, most investors recovered all of their Q4 losses as sentiment shifted and optimism dominated the US China trade negotiations. Nevertheless, many of the stocks that delivered strong returns in the first half still sport strong fundamentals and their gains were more related to the general market sentiment rather than their individual performance and hedge funds kept their bullish stance. In this article we will find out how hedge fund sentiment to SunCoke Energy, Inc (NYSE:SXC) changed recently.
SunCoke Energy, Inc (NYSE:SXC) investors should pay attention to a decrease in activity from the world's largest hedge funds lately. SXC was in 20 hedge funds' portfolios at the end of the second quarter of 2019. There were 21 hedge funds in our database with SXC positions at the end of the previous quarter. Our calculations also showed that SXC isn't among the 30 most popular stocks among hedge funds (see the video below).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Today there are many formulas stock traders employ to appraise their holdings. A couple of the less known formulas are hedge fund and insider trading sentiment. We have shown that, historically, those who follow the best picks of the elite investment managers can beat their index-focused peers by a healthy margin (see the details here).
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 check out the fresh hedge fund action surrounding SunCoke Energy, Inc (NYSE:SXC).
Hedge fund activity in SunCoke Energy, Inc (NYSE:SXC)
At Q2's end, a total of 20 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -5% from the first quarter of 2019. The graph below displays the number of hedge funds with bullish position in SXC over the last 16 quarters. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Renaissance Technologies was the largest shareholder of SunCoke Energy, Inc (NYSE:SXC), with a stake worth $45.4 million reported as of the end of March. Trailing Renaissance Technologies was Mangrove Partners, which amassed a stake valued at $26.3 million. Nokomis Capital, JHL Capital Group, and Ancora Advisors were also very fond of the stock, giving the stock large weights in their portfolios.
Due to the fact that SunCoke Energy, Inc (NYSE:SXC) has witnessed a decline in interest from the entirety of the hedge funds we track, it's easy to see that there lies a certain "tier" of funds that slashed their entire stakes in the second quarter. Intriguingly, David Costen Haley's HBK Investments cut the biggest investment of the "upper crust" of funds tracked by Insider Monkey, valued at close to $1.2 million in stock, and Andrew Feldstein and Stephen Siderow's Blue Mountain Capital was right behind this move, as the fund dumped about $0.6 million worth. These transactions are intriguing to say the least, as total hedge fund interest was cut by 1 funds in the second quarter.
Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as SunCoke Energy, Inc (NYSE:SXC) but similarly valued. We will take a look at Kimbell Royalty Partners (NYSE:KRP), Rhythm Pharmaceuticals, Inc. (NASDAQ:RYTM), Y-mAbs Therapeutics, Inc. (NASDAQ:YMAB), and Virtus Investment Partners Inc (NASDAQ:VRTS). All of these stocks' market caps are similar to SXC's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position KRP,5,17409,0 RYTM,10,148953,-1 YMAB,7,40648,3 VRTS,17,112061,2 Average,9.75,79768,1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 9.75 hedge funds with bullish positions and the average amount invested in these stocks was $80 million. That figure was $137 million in SXC's case. Virtus Investment Partners Inc (NASDAQ:VRTS) is the most popular stock in this table. On the other hand Kimbell Royalty Partners (NYSE:KRP) is the least popular one with only 5 bullish hedge fund positions. Compared to these stocks SunCoke Energy, Inc (NYSE:SXC) is more popular among hedge funds. 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. Unfortunately SXC wasn't nearly as popular as these 20 stocks and hedge funds that were betting on SXC were disappointed as the stock returned -36.5% during the third quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as many of these stocks already outperformed the market in Q3.
Disclosure: None. This article was originally published at Insider Monkey.
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