Hedge Funds Are Warming Up To Service Corporation International (SCI)

Out of thousands of stocks that are currently traded on the market, it is difficult to identify those that will really generate strong returns. Hedge funds and institutional investors spend millions of dollars on analysts with MBAs and PhDs, who are industry experts and well connected to other industry and media insiders on top of that. Individual investors can piggyback the hedge funds employing these talents and can benefit from their vast resources and knowledge in that way. We analyze quarterly 13F filings of nearly 900 hedge funds and, by looking at the smart money sentiment that surrounds a stock, we can determine whether it has the potential to beat the market over the long-term. Therefore, let’s take a closer look at what smart money thinks about Service Corporation International (NYSE:SCI).

Service Corporation International (NYSE:SCI) was in 25 hedge funds’ portfolios at the end of September. The all time high for this statistic is 37. SCI investors should pay attention to an increase in hedge fund interest in recent months. There were 24 hedge funds in our database with SCI holdings at the end of June. Our calculations also showed that SCI isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings).

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so 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. Keeping this in mind let’s take a look at the new hedge fund action encompassing Service Corporation International (NYSE:SCI).

Ryan Tolkin, CIO of Schonfeld Strategic Advisors

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

At the end of September, a total of 25 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 4% from one quarter earlier. By comparison, 30 hedge funds held shares or bullish call options in SCI a year ago. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, Select Equity Group was the largest shareholder of Service Corporation International (NYSE:SCI), with a stake worth $257.5 million reported as of the end of September. Trailing Select Equity Group was D E Shaw, which amassed a stake valued at $26.8 million. Millennium Management, Two Sigma Advisors, and Renaissance Technologies 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 MIK Capital allocated the biggest weight to Service Corporation International (NYSE:SCI), around 4.02% of its 13F portfolio. Select Equity Group is also relatively very bullish on the stock, earmarking 0.86 percent of its 13F equity portfolio to SCI.

As industrywide interest jumped, key hedge funds have jumped into Service Corporation International (NYSE:SCI) headfirst. Point72 Asset Management, managed by Steve Cohen, created the most outsized position in Service Corporation International (NYSE:SCI). Point72 Asset Management had $6.2 million invested in the company at the end of the quarter. Michael Gelband’s ExodusPoint Capital also made a $3.9 million investment in the stock during the quarter. The other funds with brand new SCI positions are Ryan Tolkin (CIO)’s Schonfeld Strategic Advisors, Jinghua Yan’s TwinBeech Capital, and Lee Ainslie’s Maverick Capital.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Service Corporation International (NYSE:SCI) but similarly valued. These stocks are On Holding AG (NYSE:ONON), RPM International Inc. (NYSE:RPM), Molson Coors Beverage Company (NYSE:TAP), Grifols SA (NASDAQ:GRFS), Zions Bancorporation, National Association (NASDAQ:ZION), Everest Re Group Ltd (NYSE:RE), and NRG Energy Inc (NYSE:NRG). This group of stocks’ market caps are closest to SCI’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 25.6 hedge funds with bullish positions and the average amount invested in these stocks was $574 million. That figure was $390 million in SCI’s case. NRG Energy Inc (NYSE:NRG) is the most popular stock in this table. On the other hand Grifols SA (NASDAQ:GRFS) is the least popular one with only 12 bullish hedge fund positions. Service Corporation International (NYSE:SCI) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for SCI is 55.8. 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 31.1% in 2021 through December 9th and still beat the market by 5.1 percentage points. A small number of hedge funds were also right about betting on SCI as the stock returned 11.1% since the end of the third quarter (through 12/9) and outperformed the market by an even larger margin.

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