Hedge Funds Are Buying Service Corporation International (SCI)

In this article you are going to find out whether hedge funds think Service Corporation International (NYSE:SCI) is a good investment right now. We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It’s not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.

Is Service Corporation International (NYSE:SCI) going to take off soon? The best stock pickers were buying. The number of bullish hedge fund bets inched up by 1 lately. Service Corporation International (NYSE:SCI) was in 24 hedge funds’ portfolios at the end of the second quarter of 2021. The all time high for this statistic is 37. Our calculations also showed that SCI isn’t among the 30 most popular stocks among hedge funds (click for Q2 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 79 percentage points since March 2017 (see the details here). So you can still find a lot of gems by following hedge funds’ moves today.

Peter Rathjens of Arrowstreet Capital

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best EV 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 take a glance at the new hedge fund action regarding Service Corporation International (NYSE:SCI).

Do Hedge Funds Think SCI Is A Good Stock To Buy Now?

At the end of June, a total of 24 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 4% from one quarter earlier. By comparison, 27 hedge funds held shares or bullish call options in SCI a year ago. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, Select Equity Group was the largest shareholder of Service Corporation International (NYSE:SCI), with a stake worth $378.2 million reported as of the end of June. Trailing Select Equity Group was Arrowstreet Capital, which amassed a stake valued at $34.8 million. Two Sigma Advisors, D E Shaw, and Renaissance Technologies 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 MIK Capital allocated the biggest weight to Service Corporation International (NYSE:SCI), around 1.72% of its 13F portfolio. Select Equity Group is also relatively very bullish on the stock, earmarking 1.29 percent of its 13F equity portfolio to SCI.

As one would reasonably expect, some big names were leading the bulls’ herd. MIK Capital, managed by Kamyar Khajavi, assembled the most valuable position in Service Corporation International (NYSE:SCI). MIK Capital had $3.4 million invested in the company at the end of the quarter. Paul Marshall and Ian Wace’s Marshall Wace LLP also initiated a $2.1 million position during the quarter. The following funds were also among the new SCI investors: Paul Tudor Jones’s Tudor Investment Corp, Bruce Kovner’s Caxton Associates LP, and Renee Yao’s Neo Ivy Capital.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Service Corporation International (NYSE:SCI) but similarly valued. These stocks are Phillips 66 Partners LP (NYSE:PSXP), Sealed Air Corporation (NYSE:SEE), Bright Horizons Family Solutions Inc (NYSE:BFAM), Juniper Networks, Inc. (NYSE:JNPR), ADT Inc. (NYSE:ADT), Dicks Sporting Goods Inc (NYSE:DKS), and Vistra Corp. (NYSE:VST). This group of stocks’ market values match SCI’s market value.

View table here if you experience formatting issues.

As you can see these stocks had an average of 23.7 hedge funds with bullish positions and the average amount invested in these stocks was $622 million. That figure was $527 million in SCI’s case. Dicks Sporting Goods Inc (NYSE:DKS) is the most popular stock in this table. On the other hand Phillips 66 Partners LP (NYSE:PSXP) is the least popular one with only 5 bullish hedge fund positions. Service Corporation International (NYSE:SCI) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for SCI is 56.1. 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 gained 24% in 2021 through October 22nd and still beat the market by 1.6 percentage points. Hedge funds were also right about betting on SCI as the stock returned 19.3% since the end of Q2 (through 10/22) 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.