Investing in small cap stocks has historically been a way to outperform the market, as small cap companies typically grow faster on an average than the blue chips. That outperformance comes with a price, however, as there are occasional periods of higher volatility. The time period between June 25 and the end of October was one of those periods, as the Russell 2000 ETF (IWM) has underperformed the larger S&P 500 ETF (SPY) by more than 14 percentage points. Given that the funds we track tend to have a disproportionate amount of their portfolios in smaller cap stocks, they have seen some volatility in their portfolios too. Actually, their moves are potentially one of the factors that contributed to this volatility. In this article, we use our extensive database of hedge fund holdings to find out what the smart money thinks of Smith & Nephew plc (ADR) (NYSE:SNN).
Is Smith & Nephew plc (ADR) (NYSE:SNN) a bargain? The smart money is in a pessimistic mood. The number of long hedge fund positions shrunk by 7 in recent months. Smith & Nephew plc (ADR) (NYSE:SNN) was in 14 hedge funds’ portfolios at the end of September. There were 21 hedge funds in our database with Smith & Nephew plc (ADR) (NYSE:SNN) holdings at the end of the previous quarter. 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 Shinhan Financial Group Co., Ltd. (ADR) (NYSE:SHG), WEC Energy Group Inc (NYSE:WEC), and Nielsen N.V. Ordinary Shares (NYSE:NLSN) to gather more data points.
Follow Smith & Nephew P L C (NYSE:SNN)
Follow Smith & Nephew P L C (NYSE:SNN)
In the financial world, there are many formulas stock traders have at their disposal to size up their holdings. Two of the most under-the-radar formulas are hedge fund and insider trading interest. Our researchers have shown that, historically, those who follow the best picks of the elite investment managers can beat the broader indices by a superb margin (see the details here).
With all of this in mind, let’s take a look at the key action encompassing Smith & Nephew plc (ADR) (NYSE:SNN).
What does the smart money think about Smith & Nephew plc (ADR) (NYSE:SNN)?
At the end of September, a total of 14 of the hedge funds tracked by Insider Monkey were long this stock, a decline of 33% from one quarter earlier. With the smart money’s capital changing hands, there exists a select group of notable hedge fund managers who were increasing their stakes substantially (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Fisher Asset Management, managed by Ken Fisher, holds the biggest position in Smith & Nephew plc (ADR) (NYSE:SNN). Fisher Asset Management has a $76.7 million position in the stock, comprising 0.2% of its 13F portfolio. On Fisher Asset Management’s heels is Eton Park Capital, managed by Eric Mindich, which holds a $19.9 million position; the fund has 0.3% of its 13F portfolio invested in the stock. Remaining peers with similar optimism contain Israel Englander’s Millennium Management, D E Shaw, and John Overdeck and David Siegel’s Two Sigma Advisors.
Since Smith & Nephew plc (ADR) (NYSE:SNN) has faced bearish sentiment from the smart money, it’s safe to say that there lies a certain “tier” of fund managers who sold off their entire stakes heading into Q4. Interestingly, Dmitry Balyasny’s Balyasny Asset Management dumped the biggest investment of the 700 funds tracked by Insider Monkey, valued at about $12.3 million in stock, and Paul Sinclair of Blue Jay Capital Management was right behind this move, as the fund dumped about $9.3 million worth. These moves are important to note, as aggregate hedge fund interest was cut by 7 funds heading into Q4.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Smith & Nephew plc (ADR) (NYSE:SNN) but similarly valued. We will take a look at Shinhan Financial Group Co., Ltd. (ADR) (NYSE:SHG), WEC Energy Group Inc (NYSE:WEC), Nielsen N.V. Ordinary Shares (NYSE:NLSN), and M&T Bank Corporation (NYSE:MTB). This group of stocks’ market caps matches SNN’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| SHG | 5 | 6730 | -3 |
| WEC | 14 | 57070 | -12 |
| NLSN | 19 | 463231 | -9 |
| MTB | 20 | 833839 | 0 |
As you can see, these stocks had an average of 15 hedge funds with bullish positions and the average amount invested in these stocks was $340 million. That figure was $159 million in Smith & Nephew plc (ADR) (NYSE:SNN)’s case. M&T Bank Corporation (NYSE:MTB) is the most popular stock in this table. On the other hand, Shinhan Financial Group Co., Ltd. (ADR) (NYSE:SHG) is the least popular one with only 5 bullish hedge fund positions. Smith & Nephew plc (ADR) (NYSE:SNN) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard M&T Bank Corporation (NYSE:MTB) might be a better candidate to consider a long position.
