We are still in an overall bull market and many stocks that smart money investors were piling into surged through the end of November. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 54% and 51% respectively. Hedge funds’ top 3 stock picks returned 41.7% this year and beat the S&P 500 ETFs by 14 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like Silgan Holdings Inc. (NASDAQ:SLGN).
Silgan Holdings Inc. (NASDAQ:SLGN) investors should pay attention to a decrease in hedge fund interest lately. SLGN was in 16 hedge funds’ portfolios at the end of the third quarter of 2019. There were 18 hedge funds in our database with SLGN holdings at the end of the previous quarter. Our calculations also showed that SLGN isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
Video: Click the image to 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 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 Russell 2000 ETFs by 40 percentage points since May 2014 (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.
Cliff Asness of AQR Capital Management
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds‘ buy/sell signals. Let’s take a look at the recent hedge fund action surrounding Silgan Holdings Inc. (NASDAQ:SLGN).
What have hedge funds been doing with Silgan Holdings Inc. (NASDAQ:SLGN)?
At the end of the third quarter, a total of 16 of the hedge funds tracked by Insider Monkey were long this stock, a change of -11% from the previous quarter. By comparison, 12 hedge funds held shares or bullish call options in SLGN a year ago. With hedgies’ positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were increasing their stakes significantly (or already accumulated large positions).
More specifically, Cardinal Capital was the largest shareholder of Silgan Holdings Inc. (NASDAQ:SLGN), with a stake worth $105.7 million reported as of the end of September. Trailing Cardinal Capital was AQR Capital Management, which amassed a stake valued at $46 million. Renaissance Technologies, Millennium Management, and D E Shaw 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 Cardinal Capital allocated the biggest weight to Silgan Holdings Inc. (NASDAQ:SLGN), around 3.49% of its 13F portfolio. AQR Capital Management is also relatively very bullish on the stock, setting aside 0.05 percent of its 13F equity portfolio to SLGN.
Because Silgan Holdings Inc. (NASDAQ:SLGN) has witnessed bearish sentiment from the entirety of the hedge funds we track, it’s safe to say that there is a sect of hedge funds who sold off their entire stakes in the third quarter. At the top of the heap, Joel Greenblatt’s Gotham Asset Management said goodbye to the biggest stake of the 750 funds monitored by Insider Monkey, worth close to $1.9 million in stock, and Benjamin A. Smith’s Laurion Capital Management was right behind this move, as the fund dumped about $1.3 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest was cut by 2 funds in the third quarter.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Silgan Holdings Inc. (NASDAQ:SLGN) but similarly valued. These stocks are On Assignment, Inc. (NYSE:ASGN), Corporate Office Properties Trust (NYSE:OFC), American National Insurance Company (NASDAQ:ANAT), and Cornerstone OnDemand, Inc. (NASDAQ:CSOD). This group of stocks’ market caps are closest to SLGN’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| ASGN | 14 | 177280 | -7 |
| OFC | 15 | 189405 | -1 |
| ANAT | 16 | 60381 | 1 |
| CSOD | 21 | 721464 | -6 |
| Average | 16.5 | 287133 | -3.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 16.5 hedge funds with bullish positions and the average amount invested in these stocks was $287 million. That figure was $220 million in SLGN’s case. Cornerstone OnDemand, Inc. (NASDAQ:CSOD) is the most popular stock in this table. On the other hand On Assignment, Inc. (NYSE:ASGN) is the least popular one with only 14 bullish hedge fund positions. Silgan Holdings Inc. (NASDAQ:SLGN) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately SLGN wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); SLGN investors were disappointed as the stock returned 2.9% during the first two months of the fourth quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as 70 percent of these stocks already outperformed the market in Q4.
Disclosure: None. This article was originally published at Insider Monkey.
