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 second 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 5 years and analyze what the smart money thinks of Stericycle Inc (NASDAQ:SRCL) based on that data and determine whether they were really smart about the stock.
Stericycle Inc (NASDAQ:SRCL) investors should pay attention to an increase in hedge fund sentiment recently. Stericycle Inc (NASDAQ:SRCL) was in 23 hedge funds’ portfolios at the end of the second quarter of 2020. The all time high for this statistics is 34. There were 20 hedge funds in our database with SRCL positions at the end of the first quarter. Our calculations also showed that SRCL isn’t among the 30 most popular stocks among hedge funds (click for Q2 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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 56 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 34% through August 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
David Blood of Generation Investment Management
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers after its stock price crashed. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. 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 website to get excerpts of these letters in your inbox. Keeping this in mind we’re going to take a gander at the latest hedge fund action encompassing Stericycle Inc (NASDAQ:SRCL).
What does smart money think about Stericycle Inc (NASDAQ:SRCL)?
At the end of June, a total of 23 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 15% from the previous quarter. The graph below displays the number of hedge funds with bullish position in SRCL over the last 20 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Stericycle Inc (NASDAQ:SRCL) was held by Generation Investment Management, which reported holding $185.1 million worth of stock at the end of September. It was followed by Ariel Investments with a $163.2 million position. Other investors bullish on the company included Southpoint Capital Advisors, Iridian Asset Management, and Diamond Hill Capital. In terms of the portfolio weights assigned to each position Silver Heights Capital Management allocated the biggest weight to Stericycle Inc (NASDAQ:SRCL), around 14.94% of its 13F portfolio. Dorset Management is also relatively very bullish on the stock, setting aside 8.23 percent of its 13F equity portfolio to SRCL.
With a general bullishness amongst the heavyweights, key hedge funds were leading the bulls’ herd. Southpoint Capital Advisors, managed by John Smith Clark, initiated the most outsized position in Stericycle Inc (NASDAQ:SRCL). Southpoint Capital Advisors had $98 million invested in the company at the end of the quarter. Sander Gerber’s Hudson Bay Capital Management also initiated a $4.9 million position during the quarter. The other funds with new positions in the stock are Israel Englander’s Millennium Management, Qing Li’s Sciencast Management, and Charles Paquelet’s Skylands Capital.
Let’s check out hedge fund activity in other stocks similar to Stericycle Inc (NASDAQ:SRCL). We will take a look at Sealed Air Corporation (NYSE:SEE), Flex Ltd. (NASDAQ:FLEX), Apache Corporation (NASDAQ:APA), Hyatt Hotels Corporation (NYSE:H), Rexford Industrial Realty Inc (NYSE:REXR), ITT Inc. (NYSE:ITT), and Brunswick Corporation (NYSE:BC). This group of stocks’ market caps match SRCL’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| SEE | 28 | 812312 | -1 |
| FLEX | 34 | 941645 | 10 |
| APA | 40 | 590803 | 5 |
| H | 27 | 468490 | 3 |
| REXR | 24 | 179158 | 9 |
| ITT | 25 | 512144 | -3 |
| BC | 35 | 1425715 | 12 |
| Average | 30.4 | 704324 | 5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 30.4 hedge funds with bullish positions and the average amount invested in these stocks was $704 million. That figure was $700 million in SRCL’s case. Apache Corporation (NASDAQ:APA) is the most popular stock in this table. On the other hand Rexford Industrial Realty Inc (NYSE:REXR) is the least popular one with only 24 bullish hedge fund positions. Compared to these stocks Stericycle Inc (NASDAQ:SRCL) is even less popular than REXR. Our overall hedge fund sentiment score for SRCL is 25.2. 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. Hedge funds clearly dropped the ball on SRCL as the stock delivered strong returns, though hedge funds’ consensus picks still generated respectable returns. 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 24.8% in 2020 through the end of September and still beat the market by 19.3 percentage points. A small number of hedge funds were also right about betting on SRCL as the stock returned 12.6% during the third quarter and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.
