We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (see why hell is coming).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 835 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of December 31st. In this article we look at what those investors think of Sonoco Products Company (NYSE:SON).
Sonoco Products Company (NYSE:SON) shares haven’t seen a lot of action during the fourth quarter. Overall, hedge fund sentiment was unchanged. The stock was in 24 hedge funds’ portfolios at the end of the fourth quarter of 2019. At the end of this article we will also compare SON to other stocks including Syneos Health, Inc. (NASDAQ:SYNH), LATAM Airlines Group S.A. (NYSE:LTM), and Sealed Air Corporation (NYSE:SEE) to get a better sense of its popularity.
If you’d ask most stock holders, hedge funds are seen as worthless, outdated financial tools of the past. While there are over 8000 funds with their doors open at present, Our experts choose to focus on the elite of this club, around 850 funds. These money managers watch over the majority of all hedge funds’ total capital, and by watching their top investments, Insider Monkey has identified a few investment strategies that have historically surpassed Mr. Market. Insider Monkey’s flagship short hedge fund strategy outstripped the S&P 500 short ETFs by around 20 percentage points a year since its inception in March 2017. Our portfolio of short stocks lost 35.3% since February 2017 (through March 3rd) even though the market was up more than 35% during the same period. We just shared a list of 7 short targets in our latest quarterly update .
Steven Cohen of Point72 Asset Management
We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind let’s go over the new hedge fund action regarding Sonoco Products Company (NYSE:SON).
How are hedge funds trading Sonoco Products Company (NYSE:SON)?
At the end of the fourth quarter, a total of 24 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from the previous quarter. The graph below displays the number of hedge funds with bullish position in SON over the last 18 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Sonoco Products Company (NYSE:SON) was held by Impax Asset Management, which reported holding $27.9 million worth of stock at the end of September. It was followed by AQR Capital Management with a $23.8 million position. Other investors bullish on the company included Royce & Associates, Citadel Investment Group, and GAMCO Investors. In terms of the portfolio weights assigned to each position Arjuna Capital allocated the biggest weight to Sonoco Products Company (NYSE:SON), around 0.95% of its 13F portfolio. Navellier & Associates is also relatively very bullish on the stock, designating 0.42 percent of its 13F equity portfolio to SON.
Because Sonoco Products Company (NYSE:SON) has faced bearish sentiment from the aggregate hedge fund industry, it’s easy to see that there was a specific group of money managers that slashed their full holdings in the third quarter. It’s worth mentioning that Renaissance Technologies cut the biggest stake of all the hedgies monitored by Insider Monkey, worth about $4.8 million in stock, and John Overdeck and David Siegel’s Two Sigma Advisors was right behind this move, as the fund dumped about $0.7 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s also examine hedge fund activity in other stocks similar to Sonoco Products Company (NYSE:SON). We will take a look at Syneos Health, Inc. (NASDAQ:SYNH), LATAM Airlines Group S.A. (NYSE:LTM), Sealed Air Corporation (NYSE:SEE), and The Middleby Corporation (NASDAQ:MIDD). This group of stocks’ market caps resemble SON’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| SYNH | 20 | 185269 | -1 |
| LTM | 14 | 33316 | 4 |
| SEE | 30 | 860935 | -4 |
| MIDD | 35 | 456204 | 10 |
| Average | 24.75 | 383931 | 2.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 24.75 hedge funds with bullish positions and the average amount invested in these stocks was $384 million. That figure was $112 million in SON’s case. The Middleby Corporation (NASDAQ:MIDD) is the most popular stock in this table. On the other hand LATAM Airlines Group S.A. (NYSE:LTM) is the least popular one with only 14 bullish hedge fund positions. Sonoco Products Company (NYSE:SON) 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 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 17.4% in 2020 through March 25th but beat the market by 5.5 percentage points. Unfortunately SON wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); SON investors were disappointed as the stock returned -32.2% during the same time period 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 most of these stocks already outperformed the market in Q1.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
