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 (read our latest 10 coronavirus predictions).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. The 800+ hedge funds and famous money managers tracked by Insider Monkey have already compiled and submitted their 13F filings for the fourth quarter, which unveil their equity positions as of December 31. We went through these filings, fixed typos and other more significant errors and identified the changes in hedge fund portfolios. Our extensive review of these public filings is finally over, so this article is set to reveal the smart money sentiment towards Steris Plc (NYSE:STE).
Steris Plc (NYSE:STE) shares haven’t seen a lot of action during the fourth quarter. Overall, hedge fund sentiment was unchanged. The stock was in 33 hedge funds’ portfolios at the end of December. At the end of this article we will also compare STE to other stocks including Varian Medical Systems, Inc. (NYSE:VAR), Alnylam Pharmaceuticals, Inc. (NASDAQ:ALNY), and Equity Lifestyle Properties, Inc. (NYSE:ELS) to get a better sense of its popularity.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by more than 41 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 35.3% through March 3rd. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Paul Tudor Jones of Tudor Investment Corp
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 we’re going to review the latest hedge fund action surrounding Steris Plc (NYSE:STE).
What have hedge funds been doing with Steris Plc (NYSE:STE)?
At the end of the fourth quarter, a total of 33 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the third quarter of 2019. Below, you can check out the change in hedge fund sentiment towards STE over the last 18 quarters. With hedgies’ sentiment swirling, there exists an “upper tier” of notable hedge fund managers who were increasing their holdings significantly (or already accumulated large positions).
The largest stake in Steris Plc (NYSE:STE) was held by Select Equity Group, which reported holding $206.5 million worth of stock at the end of September. It was followed by Fisher Asset Management with a $132.3 million position. Other investors bullish on the company included Millennium Management, Two Sigma Advisors, and GLG Partners. In terms of the portfolio weights assigned to each position Aubrey Capital Management allocated the biggest weight to Steris Plc (NYSE:STE), around 2.62% of its 13F portfolio. Select Equity Group is also relatively very bullish on the stock, dishing out 1.3 percent of its 13F equity portfolio to STE.
Judging by the fact that Steris Plc (NYSE:STE) has experienced a decline in interest from the smart money, it’s easy to see that there lies a certain “tier” of fund managers who were dropping their positions entirely by the end of the third quarter. Intriguingly, Israel Englander’s Millennium Management sold off the biggest position of the 750 funds monitored by Insider Monkey, totaling an estimated $3.6 million in stock, and Qing Li’s Sciencast Management was right behind this move, as the fund cut about $1.9 million worth. These moves are important to note, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Steris Plc (NYSE:STE) but similarly valued. These stocks are Varian Medical Systems, Inc. (NYSE:VAR), Alnylam Pharmaceuticals, Inc. (NASDAQ:ALNY), Equity Lifestyle Properties, Inc. (NYSE:ELS), and Lyft, Inc. (NASDAQ:LYFT). This group of stocks’ market values are closest to STE’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| VAR | 30 | 607160 | 1 |
| ALNY | 33 | 937654 | 3 |
| ELS | 23 | 480119 | 2 |
| LYFT | 45 | 984290 | 10 |
| Average | 32.75 | 752306 | 4 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 32.75 hedge funds with bullish positions and the average amount invested in these stocks was $752 million. That figure was $699 million in STE’s case. Lyft, Inc. (NASDAQ:LYFT) is the most popular stock in this table. On the other hand Equity Lifestyle Properties, Inc. (NYSE:ELS) is the least popular one with only 23 bullish hedge fund positions. Steris Plc (NYSE:STE) is not the most popular stock in this group but hedge fund interest is still above average. 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 22.3% in 2020 through March 16th but still beat the market by 3.2 percentage points. Hedge funds were also right about betting on STE as the stock returned -20.8% during the first quarter (through March 16th) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
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.
