Hedge Funds Are Warming Up To Shaw Communications Inc (SJR)

Although the masses and most of the financial media blame hedge funds for their exorbitant fee structure and disappointing performance, these investors have proved to have great stock picking abilities over the years (that’s why their assets under management continue to swell). We believe hedge fund sentiment should serve as a crucial tool of an individual investor’s stock selection process, as it may offer great insights of how the brightest minds of the finance industry feel about specific stocks. After all, these people have access to smartest analysts and expensive data/information sources that individual investors can’t match. So should one consider investing in Shaw Communications Inc (NYSE:SJR)? The smart money sentiment can provide an answer to this question.

Shaw Communications Inc (NYSE:SJR) investors should pay attention to an increase in support from the world’s most elite money managers in recent months. Shaw Communications Inc (NYSE:SJR) was in 23 hedge funds’ portfolios at the end of the second quarter of 2021. The all time high for this statistic was previously 21. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that SJR 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.

Seth Klarman of Baupost Group

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. Now let’s analyze the recent hedge fund action surrounding Shaw Communications Inc (NYSE:SJR).

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

At the end of the second quarter, a total of 23 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 10% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards SJR over the last 24 quarters. With the smart money’s capital changing hands, there exists a few notable hedge fund managers who were adding to their stakes considerably (or already accumulated large positions).

More specifically, Baupost Group was the largest shareholder of Shaw Communications Inc (NYSE:SJR), with a stake worth $218.1 million reported as of the end of June. Trailing Baupost Group was Magnetar Capital, which amassed a stake valued at $145.1 million. Renaissance Technologies, Arrowstreet Capital, and Odey Asset Management Group 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 Odey Asset Management Group allocated the biggest weight to Shaw Communications Inc (NYSE:SJR), around 9.83% of its 13F portfolio. NewGen Asset Management is also relatively very bullish on the stock, setting aside 6.88 percent of its 13F equity portfolio to SJR.

As aggregate interest increased, specific money managers have jumped into Shaw Communications Inc (NYSE:SJR) headfirst. Baupost Group, managed by Seth Klarman, initiated the largest position in Shaw Communications Inc (NYSE:SJR). Baupost Group had $218.1 million invested in the company at the end of the quarter. Crispin Odey’s Odey Asset Management Group also made a $43.7 million investment in the stock during the quarter. The following funds were also among the new SJR investors: Simon Sadler’s Segantii Capital, Nathaniel August’s Mangrove Partners, and John M. Angelo and Michael L. Gordon’s Angelo Gordon & Co.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Shaw Communications Inc (NYSE:SJR) but similarly valued. These stocks are News Corp (NASDAQ:NWS), Loews Corporation (NYSE:L), Solaredge Technologies Inc (NASDAQ:SEDG), PulteGroup, Inc. (NYSE:PHM), Telefonica Brasil SA (NYSE:VIV), Ceridian HCM Holding Inc. (NYSE:CDAY), and Leidos Holdings Inc (NYSE:LDOS). This group of stocks’ market valuations are closest to SJR’s market valuation.

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As you can see these stocks had an average of 24.9 hedge funds with bullish positions and the average amount invested in these stocks was $532 million. That figure was $698 million in SJR’s case. Solaredge Technologies Inc (NASDAQ:SEDG) is the most popular stock in this table. On the other hand Telefonica Brasil SA (NYSE:VIV) is the least popular one with only 9 bullish hedge fund positions. Shaw Communications Inc (NYSE:SJR) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for SJR is 62. 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 negative signal and 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% in 2021 through October 22nd and surpassed the market again by 1.6 percentage points. Unfortunately SJR wasn’t nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); SJR investors were disappointed as the stock returned 0.6% since the end of June (through 10/22) 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 in 2021.

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