Hedge Funds Are Buying State Street Corporation (STT)

In this article we are going to use hedge fund sentiment as a tool and determine whether State Street Corporation (NYSE:STT) is a good investment right now. We like to analyze hedge fund sentiment before conducting 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 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.

Is State Street Corporation (NYSE:STT) a great investment now? Investors who are in the know were in a bullish mood. The number of long hedge fund positions advanced by 5 lately. State Street Corporation (NYSE:STT) was in 37 hedge funds’ portfolios at the end of June. The all time high for this statistic is 45. Our calculations also showed that STT isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings). There were 32 hedge funds in our database with STT positions at the end of the first quarter.

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.

Donald Yacktman of Yacktman Asset Management

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, we like undervalued, EBITDA-positive growth stocks, so we are checking out stock pitches like this emerging biotech 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. Now we’re going to go over the key hedge fund action encompassing State Street Corporation (NYSE:STT).

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

Heading into the third quarter of 2021, a total of 37 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 16% from one quarter earlier. On the other hand, there were a total of 36 hedge funds with a bullish position in STT a year ago. With hedgies’ sentiment swirling, there exists an “upper tier” of key hedge fund managers who were boosting their stakes meaningfully (or already accumulated large positions).

The largest stake in State Street Corporation (NYSE:STT) was held by Yacktman Asset Management, which reported holding $290.5 million worth of stock at the end of June. It was followed by Citadel Investment Group with a $99.9 million position. Other investors bullish on the company included Schonfeld Strategic Advisors, Prana Capital Management, and GAMCO Investors. In terms of the portfolio weights assigned to each position Prana Capital Management allocated the biggest weight to State Street Corporation (NYSE:STT), around 5.52% of its 13F portfolio. Yacktman Asset Management is also relatively very bullish on the stock, designating 2.82 percent of its 13F equity portfolio to STT.

As one would reasonably expect, specific money managers have been driving this bullishness. Point72 Asset Management, managed by Steve Cohen, initiated the most valuable position in State Street Corporation (NYSE:STT). Point72 Asset Management had $17.7 million invested in the company at the end of the quarter. Ravi Chopra’s Azora Capital also initiated a $17.6 million position during the quarter. The other funds with brand new STT positions are Jinghua Yan’s TwinBeech Capital, Greg Eisner’s Engineers Gate Manager, and Allon Hellmann’s Full18 Capital.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as State Street Corporation (NYSE:STT) but similarly valued. These stocks are Keysight Technologies Inc (NYSE:KEYS), AMC Entertainment Holdings Inc (NYSE:AMC), Zebra Technologies Corporation (NASDAQ:ZBRA), Verisk Analytics, Inc. (NASDAQ:VRSK), Maxim Integrated Products Inc. (NASDAQ:MXIM), Synchrony Financial (NYSE:SYF), and WEC Energy Group, Inc. (NYSE:WEC). This group of stocks’ market values resemble STT’s market value.

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As you can see these stocks had an average of 35 hedge funds with bullish positions and the average amount invested in these stocks was $1451 million. That figure was $1117 million in STT’s case. Maxim Integrated Products Inc. (NASDAQ:MXIM) is the most popular stock in this table. On the other hand AMC Entertainment Holdings Inc (NYSE:AMC) is the least popular one with only 21 bullish hedge fund positions. State Street Corporation (NYSE:STT) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for STT is 57.5. 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 21.8% in 2021 through October 11th and still beat the market by 4.4 percentage points. Hedge funds were also right about betting on STT as the stock returned 11.3% since the end of Q2 (through 10/11) 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.