Hedge Funds Are Selling Sears Holdings Corporation (SHLD)

With the third-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 fourth quarter. One of these stocks was Sears Holdings Corporation (NASDAQ:SHLD).

Is Sears Holdings Corporation (NASDAQ:SHLD) a good investment today? Hedge funds are taking a pessimistic view. The number of bullish hedge fund positions fell by 4 recently. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity, but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Proofpoint Inc (NASDAQ:PFPT), SINA Corp (NASDAQ:SINA), and EverBank Financial Corp (NYSE:EVER) to gather more data points.

According to most investors, hedge funds are viewed as slow, old financial vehicles of the past. While there are over 8000 funds in operation today, Our experts choose to focus on the elite of this club, around 700 funds. These investment experts orchestrate most of the smart money’s total asset base, and by monitoring their top investments, Insider Monkey has brought to light a few investment strategies that have historically exceeded Mr. Market. Insider Monkey’s small-cap hedge fund strategy surpassed the S&P 500 index by 12 percentage points per annum for a decade in their back tests.

Now, let’s check out the fresh action encompassing Sears Holdings Corporation (NASDAQ:SHLD).

How have hedgies been trading Sears Holdings Corporation (NASDAQ:SHLD)?

At the end of the third quarter, a total of 22 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -15% from the previous quarter. With hedgies’ positions undergoing their usual ebb and flow, there exists a select group of noteworthy hedge fund managers who were increasing their stakes meaningfully (or already accumulated large positions).

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Fairholme (FAIRX), managed by Bruce Berkowitz, holds the most valuable position in Sears Holdings Corporation (NASDAQ:SHLD). Fairholme (FAIRX) has an $602.3 million position in the stock, comprising 17.4% of its 13F portfolio. Sitting at the No. 2 spot is Edward Lampert’s ESL Investments, with an $505 million position; 32.2% of its 13F portfolio is allocated to the stock.

Since Sears Holdings Corporation (NASDAQ:SHLD) has witnessed bearish sentiment from hedge fund managers, it’s easy to see that there lies a certain “tier” of fund managers that elected to cut their positions entirely last quarter. Intriguingly, Stephen C. Freidheim’s Cyrus Capital Partners sold off the biggest stake of all the hedgies tracked by Insider Monkey, valued at an estimated $3.3 million in stock. Frank Brosens’s fund, Taconic Capital, also said goodbye to its holding, about $1.5 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest was cut by 4 funds last quarter.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Sears Holdings Corporation (NASDAQ:SHLD) but similarly valued. These stocks are Proofpoint Inc (NASDAQ:PFPT), SINA Corp (NASDAQ:SINA), EverBank Financial Corp (NYSE:EVER), and KBR, Inc. (NYSE:KBR). All of these stocks’ market caps resemble SHLD’s market cap.

As you can see these stocks had an average of 18 hedge funds with bullish positions and the average amount invested in these stocks was $363 million. That figure was $1.68 billion in SHLD’s case. KBR, Inc. (NYSE:KBR) is the most popular stock in this table. On the other hand EverBank Financial Corp (NYSE:EVER) is the least popular one with only 8 bullish hedge fund positions. Sears Holdings Corporation (NASDAQ:SHLD) is not the most popular stock in this group, but hedge fund interest is still above average. This is a slightly positive signal, but we’d rather spend our time researching stocks that hedge funds are piling on. In this regard KBR might be a better candidate to consider a long position.