Do Hedge Funds Love Schnitzer Steel Industries, Inc. (SCHN)?

Is Schnitzer Steel Industries, Inc. (NASDAQ:SCHN) a good bet right now? We like to analyze hedge fund sentiment before doing days of in-depth research. We do so because hedge funds and other elite investors have numerous Ivy League graduates, expert network advisers, and supply chain tipsters working or consulting for them. There is not a shortage of news stories covering failed hedge fund investments (for some reason media paid a ton of attention to Ackman’s gigantic JC Penney and Valeant failures) and it is a fact that hedge funds’ picks don’t beat the market 100% of the time, but their consensus picks have historically done very well and have outperformed the market after adjusting for risk.

Schnitzer Steel Industries, Inc. (NASDAQ:SCHN) investors should be aware of an increase in hedge fund sentiment recently. 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 First Foundation Inc (NASDAQ:FFWM), Bazaarvoice Inc (NASDAQ:BV), and Chase Corporation (NYSEAMEX:CCF) to gather more data points.

According to most stock holders, hedge funds are viewed as slow, outdated financial vehicles of years past. While there are greater than an 8000 funds with their doors open at present, We look at the top tier of this club, about 700 funds. These investment experts handle bulk of all hedge funds’ total asset base, and by paying attention to their first-class equity investments, Insider Monkey has unsheathed numerous investment strategies that have historically outperformed the market. Insider Monkey’s small-cap hedge fund strategy outrun the S&P 500 index by 12 percentage points a year for a decade in their back tests.

Now, we’re going to go over the recent action regarding Schnitzer Steel Industries, Inc. (NASDAQ:SCHN).

Hedge fund activity in Schnitzer Steel Industries, Inc. (NASDAQ:SCHN)

Heading into Q4, a total of 17 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 21% from the second quarter. With the smart money’s positions undergoing their usual ebb and flow, there exists a select group of noteworthy hedge fund managers who were boosting their stakes substantially (or already accumulated large positions).

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Rutabaga Capital Management, managed by Peter Schliemann, holds the most valuable position in Schnitzer Steel Industries, Inc. (NASDAQ:SCHN). Rutabaga Capital Management has a $21.5 million position in the stock, comprising 2.6% of its 13F portfolio. On Rutabaga Capital Management’s heels is Pzena Investment Management, managed by Richard S. Pzena, which holds a $13.7 million position; the fund has 0.1% of its 13F portfolio invested in the stock. The remaining members of the smart money that hold long positions include Robert Polak’s Anchor Bolt Capital, Jim Simons’ Renaissance Technologies and John Thiessen’s Vertex One Asset Management.

As industrywide interest jumped, some big names have been driving this bullishness. Anchor Bolt Capital created the most valuable position in Schnitzer Steel Industries, Inc. (NASDAQ:SCHN). Joel Greenblatt’s Gotham Asset Management also made a $0.4 million investment in the stock during the quarter. The following funds were also among the new SCHN investors: Glenn Russell Dubin’s Highbridge Capital Management, Cliff Asness’ AQR Capital Management, and Paul Tudor Jones’ Tudor Investment Corp.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Schnitzer Steel Industries, Inc. (NASDAQ:SCHN) but similarly valued. These stocks are First Foundation Inc (NASDAQ:FFWM), Bazaarvoice Inc (NASDAQ:BV), Chase Corporation (NYSEAMEX:CCF), and BlackRock Debt Strategies Fund, Inc. (NYSE:DSU). This group of stocks’ market valuations match SCHN’s market valuation.

As you can see these stocks had an average of 10 hedge funds with bullish positions and the average amount invested in these stocks was $57 million. That figure was $76 million in SCHN’s case. Bazaarvoice Inc (NASDAQ:BV) is the most popular stock in this table, while BlackRock Debt Strategies Fund, Inc. (NYSE:DSU) is the least popular one with only 5 bullish hedge fund positions. Compared to these stocks Schnitzer Steel Industries, Inc. (NASDAQ:SCHN) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.