Hedge Funds Aren’t Done Buying SEI Investments Company (SEIC)

In this article you are going to find out whether hedge funds think SEI Investments Company (NASDAQ:SEIC) is a good investment right now. We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It’s not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.

SEI Investments Company (NASDAQ:SEIC) was in 33 hedge funds’ portfolios at the end of March. SEIC investors should be aware of an increase in support from the world’s most elite money managers of late. There were 29 hedge funds in our database with SEIC holdings at the end of the previous quarter. Our calculations also showed that SEIC isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).

Video: Watch our video about the top 5 most popular hedge fund stocks.

So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 more than 51 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. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.

Chuck Royce of Royce & Associates

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out trades like this one. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind let’s take a gander at the fresh hedge fund action encompassing SEI Investments Company (NASDAQ:SEIC).

What does smart money think about SEI Investments Company (NASDAQ:SEIC)?

At Q1’s end, a total of 33 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 14% from one quarter earlier. On the other hand, there were a total of 24 hedge funds with a bullish position in SEIC a year ago. With hedgies’ capital changing hands, there exists a few notable hedge fund managers who were boosting their holdings considerably (or already accumulated large positions).

Among these funds, Renaissance Technologies held the most valuable stake in SEI Investments Company (NASDAQ:SEIC), which was worth $41.5 million at the end of the third quarter. On the second spot was Millennium Management which amassed $29.8 million worth of shares. Junto Capital Management, Arrowstreet Capital, and Royce & Associates 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 Azora Capital allocated the biggest weight to SEI Investments Company (NASDAQ:SEIC), around 7.39% of its 13F portfolio. Goodnow Investment Group is also relatively very bullish on the stock, designating 3.26 percent of its 13F equity portfolio to SEIC.

As aggregate interest increased, key money managers were breaking ground themselves. Millennium Management, managed by Israel Englander, assembled the largest position in SEI Investments Company (NASDAQ:SEIC). Millennium Management had $29.8 million invested in the company at the end of the quarter. James Parsons’s Junto Capital Management also made a $23.7 million investment in the stock during the quarter. The following funds were also among the new SEIC investors: Ravi Chopra’s Azora Capital, John W. Rogers’s Ariel Investments, and Alec Litowitz and Ross Laser’s Magnetar Capital.

Let’s now review hedge fund activity in other stocks similar to SEI Investments Company (NASDAQ:SEIC). These stocks are The Toro Company (NYSE:TTC), Chemed Corporation (NYSE:CHE), Vornado Realty Trust (NYSE:VNO), and WABCO Holdings Inc. (NYSE:WBC). This group of stocks’ market values match SEIC’s market value.

View table here if you experience formatting issues.

As you can see these stocks had an average of 26.5 hedge funds with bullish positions and the average amount invested in these stocks was $669 million. That figure was $255 million in SEIC’s case. WABCO Holdings Inc. (NYSE:WBC) is the most popular stock in this table. On the other hand The Toro Company (NYSE:TTC) is the least popular one with only 24 bullish hedge fund positions. Compared to these stocks SEI Investments Company (NASDAQ:SEIC) is more popular among hedge funds. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 8.3% in 2020 through the end of May and still beat the market by 13.2 percentage points. Unfortunately SEIC wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on SEIC were disappointed as the stock returned 17% during the second quarter (through the end of May) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.

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