Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the first quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 4.5 years and analyze what the smart money thinks of Schnitzer Steel Industries, Inc. (NASDAQ:SCHN) based on that data and determine whether they were really smart about the stock.
Schnitzer Steel Industries, Inc. (NASDAQ:SCHN) investors should be aware of an increase in hedge fund interest recently. SCHN was in 11 hedge funds’ portfolios at the end of the first quarter of 2020. There were 10 hedge funds in our database with SCHN holdings at the end of the previous quarter. Our calculations also showed that SCHN isn’t among the 30 most popular stocks among hedge funds (click for Q1 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 58 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.
Fred DiSanto of Ancora Advisors
At Insider Monkey we scour multiple sources to uncover the next great investment idea. There is a lot of volatility in the markets and this presents amazing investment opportunities from time to time. For example, this trader claims to deliver juiced up returns with one trade a week, so we are checking out his highest conviction idea. A second trader claims to score lucrative profits by utilizing a “weekend trading strategy”, so we look into his strategy’s picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We recently recommended several stocks partly inspired by legendary Bill Miller’s investor letter. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind we’re going to take a look at the key hedge fund action regarding Schnitzer Steel Industries, Inc. (NASDAQ:SCHN).
How have hedgies been trading Schnitzer Steel Industries, Inc. (NASDAQ:SCHN)?
At Q1’s end, a total of 11 of the hedge funds tracked by Insider Monkey were long this stock, a change of 10% from the previous quarter. The graph below displays the number of hedge funds with bullish position in SCHN over the last 18 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Of the funds tracked by Insider Monkey, Renaissance Technologies has the number one position in Schnitzer Steel Industries, Inc. (NASDAQ:SCHN), worth close to $1.8 million, amounting to less than 0.1%% of its total 13F portfolio. The second most bullish fund manager is D E Shaw, managed by D. E. Shaw, which holds a $1.3 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Other peers with similar optimism comprise David Harding’s Winton Capital Management, Cliff Asness’s AQR Capital Management and Matthew Hulsizer’s PEAK6 Capital Management. In terms of the portfolio weights assigned to each position Zebra Capital Management allocated the biggest weight to Schnitzer Steel Industries, Inc. (NASDAQ:SCHN), around 0.33% of its 13F portfolio. PDT Partners is also relatively very bullish on the stock, setting aside 0.03 percent of its 13F equity portfolio to SCHN.
As aggregate interest increased, specific money managers were leading the bulls’ herd. D E Shaw, managed by D. E. Shaw, initiated the largest position in Schnitzer Steel Industries, Inc. (NASDAQ:SCHN). D E Shaw had $1.3 million invested in the company at the end of the quarter. Matthew Hulsizer’s PEAK6 Capital Management also initiated a $0.6 million position during the quarter. The following funds were also among the new SCHN investors: Peter Muller’s PDT Partners and Frederick DiSanto’s Ancora Advisors.
Let’s also examine hedge fund activity in other stocks similar to Schnitzer Steel Industries, Inc. (NASDAQ:SCHN). These stocks are Mirum Pharmaceuticals, Inc. (NASDAQ:MIRM), NeoPhotonics Corp (NYSE:NPTN), Resources Connection, Inc. (NASDAQ:RECN), and Village Super Market, Inc. (NASDAQ:VLGEA). This group of stocks’ market caps match SCHN’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| MIRM | 8 | 138087 | 1 |
| NPTN | 24 | 68849 | 5 |
| RECN | 10 | 39658 | -2 |
| VLGEA | 7 | 22483 | -3 |
| Average | 12.25 | 67269 | 0.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 12.25 hedge funds with bullish positions and the average amount invested in these stocks was $67 million. That figure was $7 million in SCHN’s case. NeoPhotonics Corp (NYSE:NPTN) is the most popular stock in this table. On the other hand Village Super Market, Inc. (NASDAQ:VLGEA) is the least popular one with only 7 bullish hedge fund positions. Schnitzer Steel Industries, Inc. (NASDAQ:SCHN) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 12.3% in 2020 through June 30th and still beat the market by 15.5 percentage points. A small number of hedge funds were also right about betting on SCHN as the stock returned 37% during the second quarter and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.
