Hedge Funds Are Piling Into Snap-on Incorporated (SNA)

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. Insider Monkey finished processing 873 13F filings submitted by hedge funds and prominent investors. These filings show these funds’ portfolio positions as of June 30th, 2021. What do these smart investors think about Snap-on Incorporated (NYSE:SNA)?

Snap-on Incorporated (NYSE:SNA) has experienced an increase in hedge fund interest lately. Snap-on Incorporated (NYSE:SNA) was in 31 hedge funds’ portfolios at the end of June. The all time high for this statistic is 31. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that SNA 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. 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 79 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.

John Rogers of Ariel Investments

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 let’s view the fresh hedge fund action encompassing Snap-on Incorporated (NYSE:SNA).

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

At the end of the second quarter, a total of 31 of the hedge funds tracked by Insider Monkey were long this stock, a change of 72% from the first quarter of 2020. On the other hand, there were a total of 20 hedge funds with a bullish position in SNA a year ago. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, Ariel Investments was the largest shareholder of Snap-on Incorporated (NYSE:SNA), with a stake worth $224.4 million reported as of the end of June. Trailing Ariel Investments was AQR Capital Management, which amassed a stake valued at $128.4 million. Millennium Management, Renaissance Technologies, and Balyasny Asset Management 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 Ariel Investments allocated the biggest weight to Snap-on Incorporated (NYSE:SNA), around 2.11% of its 13F portfolio. Quantamental Technologies is also relatively very bullish on the stock, dishing out 0.63 percent of its 13F equity portfolio to SNA.

Now, key hedge funds have jumped into Snap-on Incorporated (NYSE:SNA) headfirst. Renaissance Technologies, established the biggest position in Snap-on Incorporated (NYSE:SNA). Renaissance Technologies had $26.2 million invested in the company at the end of the quarter. Dmitry Balyasny’s Balyasny Asset Management also made a $17.6 million investment in the stock during the quarter. The following funds were also among the new SNA investors: Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, Paul Tudor Jones’s Tudor Investment Corp, and Ryan Tolkin (CIO)’s Schonfeld Strategic Advisors.

Let’s now take a look at hedge fund activity in other stocks similar to Snap-on Incorporated (NYSE:SNA). These stocks are McAfee Corp. (NASDAQ:MCFE), Host Hotels and Resorts Inc (NASDAQ:HST), Williams-Sonoma, Inc. (NYSE:WSM), Weibo Corp (NASDAQ:WB), Lincoln National Corporation (NYSE:LNC), Penn National Gaming, Inc (NASDAQ:PENN), and QuantumScape Corporation (NYSE:QS). This group of stocks’ market valuations are similar to SNA’s market valuation.

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As you can see these stocks had an average of 26.6 hedge funds with bullish positions and the average amount invested in these stocks was $492 million. That figure was $500 million in SNA’s case. Penn National Gaming, Inc (NASDAQ:PENN) is the most popular stock in this table. On the other hand Weibo Corp (NASDAQ:WB) is the least popular one with only 14 bullish hedge fund positions. Snap-on Incorporated (NYSE:SNA) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for SNA is 72.7. 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. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. 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 beat the market again by 4.5 percentage points. Unfortunately SNA wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on SNA were disappointed as the stock returned -1.4% since the end of June (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 many of these stocks already outperformed the market since 2019.

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