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The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We have processed the filings of the more than 817 world-class investment firms that we track and now have access to the collective wisdom contained in these filings, which are based on their September 30 holdings, data that is available nowhere else. Should you consider Sensient Technologies Corporation (NYSE:SXT) for your portfolio? We'll look to this invaluable collective wisdom for the answer.
Is SXT a good stock to buy now? Sensient Technologies Corporation (NYSE:SXT) has experienced a decrease in hedge fund interest of late. Sensient Technologies Corporation (NYSE:SXT) was in 22 hedge funds' portfolios at the end of the third quarter of 2020. The all time high for this statistic is 23. There were 23 hedge funds in our database with SXT positions at the end of the second quarter. Our calculations also showed that SXT 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).
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.
Richard Gerson of Falcon Edge Capital
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. Keeping this in mind let's take a glance at the new hedge fund action surrounding Sensient Technologies Corporation (NYSE:SXT).
Do Hedge Funds Think SXT Is A Good Stock To Buy Now?
At the end of the third quarter, a total of 22 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -4% from the second quarter of 2020. Below, you can check out the change in hedge fund sentiment towards SXT over the last 21 quarters. With hedgies' positions undergoing their usual ebb and flow, there exists a few notable hedge fund managers who were boosting their holdings significantly (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, holds the largest position in Sensient Technologies Corporation (NYSE:SXT). Arrowstreet Capital has a $34.4 million position in the stock, comprising 0.1% of its 13F portfolio. Coming in second is GAMCO Investors, led by Mario Gabelli, holding a $29.7 million position; the fund has 0.3% of its 13F portfolio invested in the stock. Other professional money managers with similar optimism comprise Richard Gerson and Navroz D. Udwadia's Falcon Edge Capital, Dmitry Balyasny's Balyasny Asset Management and Paul Marshall and Ian Wace's Marshall Wace LLP. In terms of the portfolio weights assigned to each position Sandbar Asset Management allocated the biggest weight to Sensient Technologies Corporation (NYSE:SXT), around 4.74% of its 13F portfolio. Falcon Edge Capital is also relatively very bullish on the stock, dishing out 2.41 percent of its 13F equity portfolio to SXT.
Judging by the fact that Sensient Technologies Corporation (NYSE:SXT) has experienced falling interest from the smart money, it's easy to see that there lies a certain "tier" of hedgies that elected to cut their full holdings last quarter. Interestingly, Greg Eisner's Engineers Gate Manager sold off the biggest stake of the 750 funds followed by Insider Monkey, worth about $2.9 million in stock. Michael Gelband's fund, ExodusPoint Capital, also sold off its stock, about $0.7 million worth. These moves are interesting, as total hedge fund interest fell by 1 funds last quarter.
Let's check out hedge fund activity in other stocks - not necessarily in the same industry as Sensient Technologies Corporation (NYSE:SXT) but similarly valued. These stocks are ABM Industries, Inc. (NYSE:ABM), CarGurus, Inc. (NASDAQ:CARG), Stepan Company (NYSE:SCL), Echostar Corporation (NASDAQ:SATS), Brookfield Business Partners L.P. (NYSE:BBU), Avient Corporation (NYSE:AVNT), and Agios Pharmaceuticals Inc (NASDAQ:AGIO). This group of stocks' market caps are similar to SXT's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position ABM,18,48485,-3 CARG,32,328264,1 SCL,12,46672,-3 SATS,28,346080,-1 BBU,4,4337,1 AVNT,20,221331,-2 AGIO,31,330249,1 Average,20.7,189345,-0.9 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 20.7 hedge funds with bullish positions and the average amount invested in these stocks was $189 million. That figure was $219 million in SXT's case. CarGurus, Inc. (NASDAQ:CARG) is the most popular stock in this table. On the other hand Brookfield Business Partners L.P. (NYSE:BBU) is the least popular one with only 4 bullish hedge fund positions. Sensient Technologies Corporation (NYSE:SXT) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for SXT is 64.8. 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 gained 30.7% in 2020 through December 14th and still beat the market by 15.8 percentage points. Hedge funds were also right about betting on SXT as the stock returned 25.6% since the end of Q3 (through 12/14) 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.