Hedge Funds Are Nibbling On Sensata Technologies Holding plc (ST)

While the market driven by short-term sentiment influenced by the accommodative interest rate environment in the US, virus news and stimulus spending, many smart money investors are starting to get cautious towards the current bull run since March, 2020 and hedging or reducing many of their long positions. Some fund managers are betting on Dow hitting 40,000 to generate strong returns. However, as we know, big investors usually buy stocks with strong fundamentals that can deliver gains both in bull and bear markets, which is why we believe we can profit from imitating them. In this article, we are going to take a look at the smart money sentiment surrounding Sensata Technologies Holding plc (NYSE:ST).

Is Sensata Technologies Holding plc (NYSE:ST) a healthy stock for your portfolio? Investors who are in the know were getting more bullish. The number of bullish hedge fund bets rose by 1 in recent months. Sensata Technologies Holding plc (NYSE:ST) was in 36 hedge funds’ portfolios at the end of the first quarter of 2021. The all time high for this statistic is 37. Our calculations also showed that ST isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings). There were 35 hedge funds in our database with ST holdings at the end of December.

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 115 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.

David Blood of Generation Investment Management

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 battery 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. With all of this in mind let’s take a gander at the latest hedge fund action surrounding Sensata Technologies Holding plc (NYSE:ST).

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

At the end of March, a total of 36 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 3% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards ST over the last 23 quarters. With hedgies’ positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were upping their holdings substantially (or already accumulated large positions).

According to Insider Monkey’s hedge fund database, Generation Investment Management, managed by David Blood and Al Gore, holds the biggest position in Sensata Technologies Holding plc (NYSE:ST). Generation Investment Management has a $669.6 million position in the stock, comprising 2.8% of its 13F portfolio. The second largest stake is held by Select Equity Group, managed by Robert Joseph Caruso, which holds a $449.3 million position; the fund has 1.6% of its 13F portfolio invested in the stock. Remaining peers that hold long positions comprise William B. Gray’s Orbis Investment Management, Matthew Stadelman’s Diamond Hill Capital and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital. In terms of the portfolio weights assigned to each position Goodnow Investment Group allocated the biggest weight to Sensata Technologies Holding plc (NYSE:ST), around 3.11% of its 13F portfolio. Generation Investment Management is also relatively very bullish on the stock, dishing out 2.81 percent of its 13F equity portfolio to ST.

Now, some big names have jumped into Sensata Technologies Holding plc (NYSE:ST) headfirst. Polar Capital, managed by Brian Ashford-Russell and Tim Woolley, established the most outsized position in Sensata Technologies Holding plc (NYSE:ST). Polar Capital had $18 million invested in the company at the end of the quarter. Hari Hariharan’s NWI Management also initiated a $5.8 million position during the quarter. The other funds with new positions in the stock are Joe DiMenna’s ZWEIG DIMENNA PARTNERS, Paul Tudor Jones’s Tudor Investment Corp, and Qing Li’s Sciencast Management.

Let’s now review hedge fund activity in other stocks similar to Sensata Technologies Holding plc (NYSE:ST). These stocks are Neurocrine Biosciences, Inc. (NASDAQ:NBIX), ImmunityBio, Inc. (NASDAQ:IBRX), Axon Enterprise, Inc. (NASDAQ:AXON), Sasol Limited (NYSE:SSL), Kirkland Lake Gold Ltd. (NYSE:KL), AGNC Investment Corp. (NASDAQ:AGNC), and Ralph Lauren Corporation (NYSE:RL). All of these stocks’ market caps match ST’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 20 hedge funds with bullish positions and the average amount invested in these stocks was $413 million. That figure was $1745 million in ST’s case. Ralph Lauren Corporation (NYSE:RL) is the most popular stock in this table. On the other hand ImmunityBio, Inc. (NASDAQ:IBRX) is the least popular one with only 6 bullish hedge fund positions. Compared to these stocks Sensata Technologies Holding plc (NYSE:ST) is more popular among hedge funds. Our overall hedge fund sentiment score for ST is 85.2. 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. 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 19.3% in 2021 through June 25th and still beat the market by 4.8 percentage points. Unfortunately ST wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on ST were disappointed as the stock returned 0.5% since the end of the first quarter (through 6/25) 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.

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