Hedge Funds Are Crazy About Stem, Inc. (STEM)

With the second-quarter round of 13F filings behind us it is time to take a look at the stocks in which some of the best money managers in the world preferred to invest or sell heading into the third quarter of 2021. One of these stocks was Stem, Inc. (NYSE:STEM).

Is Stem, Inc. (NYSE:STEM) a bargain? Prominent investors were buying. The number of bullish hedge fund bets stood at 29 at the end of the second quarter of 2021. Our calculations also showed that STEM 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.

Christian Leone of Luxor Capital Group

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. Now let’s review the new hedge fund action encompassing Stem, Inc. (NYSE:STEM).

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

Heading into the third quarter of 2021, a total of 29 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 29 from the first quarter of 2020. The graph below displays the number of hedge funds with bullish position in STEM over the last 24 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, Athanor Capital held the most valuable stake in Stem, Inc. (NYSE:STEM), which was worth $91.5 million at the end of the second quarter. On the second spot was Senator Investment Group which amassed $79.2 million worth of shares. Adage Capital Management, Luxor Capital Group, and DSAM Partners 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 DSAM Partners allocated the biggest weight to Stem, Inc. (NYSE:STEM), around 5.33% of its 13F portfolio. Yaupon Capital is also relatively very bullish on the stock, setting aside 4.98 percent of its 13F equity portfolio to STEM.

Now, some big names have been driving this bullishness. Athanor Capital, managed by Parvinder Thiara, assembled the largest position in Stem, Inc. (NYSE:STEM). Athanor Capital had $91.5 million invested in the company at the end of the quarter. Doug Silverman and Alexander Klabin’s Senator Investment Group also made a $79.2 million investment in the stock during the quarter. The other funds with brand new STEM positions are Phill Gross and Robert Atchinson’s Adage Capital Management, Christian Leone’s Luxor Capital Group, and Guy Shahar’s DSAM Partners.

Let’s now review hedge fund activity in other stocks similar to Stem, Inc. (NYSE:STEM). We will take a look at John Bean Technologies Corporation (NYSE:JBT), Galapagos NV (NASDAQ:GLPG), Itron, Inc. (NASDAQ:ITRI), fuboTV Inc. (NYSE:FUBO), Xerox Holdings Corporation (NASDAQ:XRX), Shake Shack Inc (NYSE:SHAK), and UMB Financial Corporation (NASDAQ:UMBF). All of these stocks’ market caps resemble STEM’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 19.3 hedge funds with bullish positions and the average amount invested in these stocks was $372 million. That figure was $509 million in STEM’s case. Xerox Holdings Corporation (NASDAQ:XRX) is the most popular stock in this table. On the other hand UMB Financial Corporation (NASDAQ:UMBF) is the least popular one with only 14 bullish hedge fund positions. Compared to these stocks Stem, Inc. (NYSE:STEM) is more popular among hedge funds. Our overall hedge fund sentiment score for STEM is 90. 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 24.9% in 2021 through October 15th and still beat the market by 4.5 percentage points. Unfortunately STEM wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on STEM were disappointed as the stock returned -38.7% since the end of the second quarter (through 10/15) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market since 2019.

Suggested Articles:

• Louis Navellier’s Stock Picks in 2021
• 10 Best Telecom Stocks to Buy Right Now
• 10 Best High Yield Dividend Stocks to Buy in June

Disclosure: None. This article was originally published at Insider Monkey.