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In this article we will analyze whether Signet Jewelers Limited (NYSE:SIG) is a good investment right now by following the lead of some of the best investors in the world and piggybacking their ideas. There's no better way to get these firms' immense resources and analytical capabilities working for us than to follow their lead into their best ideas. While not all of these picks will be winners, our research shows that these picks historically outperformed the market by double digits annually.
Signet Jewelers Limited (NYSE:SIG) was in 26 hedge funds' portfolios at the end of March. The all time high for this statistic is 55. SIG shareholders have witnessed a decrease in hedge fund sentiment of late. There were 30 hedge funds in our database with SIG positions at the end of the fourth quarter. Our calculations also showed that SIG isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings).
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. Hedge funds have more than $3.5 trillion in assets under management, so you can't expect their entire portfolios to beat the market by large margins. 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 115 percentage points since March 2017 (see the details here). So you can still find a lot of gems by following hedge funds' moves today.
David E. Shaw of D.E. Shaw
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, economists warn of inflation flare up. So, we are checking out this backdoor gold play that has hit peak gains of 718% in a little over a year. We go through lists like the 10 best battery stocks to pick the next Tesla that will deliver a 10x return. 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 homepage. Keeping this in mind we're going to go over the recent hedge fund action encompassing Signet Jewelers Limited (NYSE:SIG).
Do Hedge Funds Think SIG Is A Good Stock To Buy Now?
At Q1's end, a total of 26 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -13% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in SIG over the last 23 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, Select Equity Group held the most valuable stake in Signet Jewelers Limited (NYSE:SIG), which was worth $394 million at the end of the fourth quarter. On the second spot was D E Shaw which amassed $124 million worth of shares. Contrarius Investment Management, Melvin Capital Management, and Arrowstreet Capital were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Contrarius Investment Management allocated the biggest weight to Signet Jewelers Limited (NYSE:SIG), around 6.62% of its 13F portfolio. Kettle Hill Capital Management is also relatively very bullish on the stock, designating 1.44 percent of its 13F equity portfolio to SIG.
Because Signet Jewelers Limited (NYSE:SIG) has witnessed declining sentiment from the smart money, it's safe to say that there was a specific group of money managers that elected to cut their entire stakes by the end of the first quarter. Interestingly, Dmitry Balyasny's Balyasny Asset Management dumped the largest position of all the hedgies monitored by Insider Monkey, worth close to $13.9 million in stock, and Kamyar Khajavi's MIK Capital was right behind this move, as the fund cut about $8.5 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest fell by 4 funds by the end of the first quarter.
Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as Signet Jewelers Limited (NYSE:SIG) but similarly valued. We will take a look at Integer Holdings Corporation (NYSE:ITGR), CommVault Systems, Inc. (NASDAQ:CVLT), Atlantic Union Bankshares Corporation (NASDAQ:AUB), John Wiley & Sons Inc (NYSE:JW), ExlService Holdings, Inc. (NASDAQ:EXLS), PureCycle Technologies, Inc. (NASDAQ:PCT), and American Equity Investment Life Holding Company (NYSE:AEL). This group of stocks' market caps are similar to SIG's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position ITGR,16,217349,-8 CVLT,23,533620,0 AUB,11,42633,3 JW,16,190834,2 EXLS,14,72523,-2 PCT,21,659105,21 AEL,24,262302,1 Average,17.9,282624,2.4 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 17.9 hedge funds with bullish positions and the average amount invested in these stocks was $283 million. That figure was $946 million in SIG's case. American Equity Investment Life Holding Company (NYSE:AEL) is the most popular stock in this table. On the other hand Atlantic Union Bankshares Corporation (NASDAQ:AUB) is the least popular one with only 11 bullish hedge fund positions. Compared to these stocks Signet Jewelers Limited (NYSE:SIG) is more popular among hedge funds. Our overall hedge fund sentiment score for SIG is 65.2. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks returned 24% in 2021 through July 9th but still managed to beat the market by 6.7 percentage points. Hedge funds were also right about betting on SIG as the stock returned 32.2% since the end of March (through 7/9) 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.