Hedge funds are known to underperform the bull markets but that’s not because they are terrible at stock picking. Hedge funds underperform because their net exposure in only 40-70% and they charge exorbitant fees. No one knows what the future holds and how market participants will react to the bountiful news that floods in each day. However, hedge funds’ consensus picks on average deliver market beating returns. For example the Standard and Poor’s 500 Total Return Index ETFs returned 27.5% (including dividend payments) through the end of November. Conversely, hedge funds’ top 20 large-cap stock picks generated a return of nearly 37.4% during the same period, with the majority of these stock picks outperforming the broader market benchmark. Interestingly, an average long/short hedge fund returned only a fraction of this value due to the hedges they implemented and the large fees they charged. If you pay attention to the actual hedge fund returns versus the returns of their long stock picks, you might believe that it is a waste of time to analyze hedge funds’ purchases. We know better. That’s why we scrutinize hedge fund sentiment before we invest in a stock like Superior Industries International Inc. (NYSE:SUP).
Superior Industries International Inc. (NYSE:SUP) was in 16 hedge funds’ portfolios at the end of September. SUP investors should pay attention to an increase in hedge fund interest lately. There were 15 hedge funds in our database with SUP positions at the end of the previous quarter. Our calculations also showed that SUP isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s flagship best performing hedge funds strategy returned 91% since May 2014 and outperformed the Russell 2000 ETFs by nearly 40 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Israel Englander of Millennium Management
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds‘ buy/sell signals. Let’s view the latest hedge fund action regarding Superior Industries International Inc. (NYSE:SUP).
Hedge fund activity in Superior Industries International Inc. (NYSE:SUP)
At the end of the third quarter, a total of 16 of the hedge funds tracked by Insider Monkey were long this stock, a change of 7% from the second quarter of 2019. Below, you can check out the change in hedge fund sentiment towards SUP over the last 17 quarters. With hedge funds’ sentiment swirling, there exists a few notable hedge fund managers who were upping their stakes substantially (or already accumulated large positions).
The largest stake in Superior Industries International Inc. (NYSE:SUP) was held by DC Capital Partners, which reported holding $3.5 million worth of stock at the end of September. It was followed by Millennium Management with a $3 million position. Other investors bullish on the company included GAMCO Investors, Royce & Associates, and Marshall Wace. In terms of the portfolio weights assigned to each position DC Capital Partners allocated the biggest weight to Superior Industries International Inc. (NYSE:SUP), around 3.04% of its 13F portfolio. Algert Coldiron Investors is also relatively very bullish on the stock, earmarking 0.07 percent of its 13F equity portfolio to SUP.
With a general bullishness amongst the heavyweights, specific money managers were leading the bulls’ herd. AQR Capital Management, managed by Cliff Asness, established the most outsized position in Superior Industries International Inc. (NYSE:SUP). AQR Capital Management had $0.2 million invested in the company at the end of the quarter. Noam Gottesman’s GLG Partners also initiated a $0.1 million position during the quarter. The following funds were also among the new SUP investors: Ken Griffin’s Citadel Investment Group, Ken Griffin’s Citadel Investment Group, and Michael Platt and William Reeves’s BlueCrest Capital Mgmt..
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| ORGS | 1 | 685 | 0 |
| APEN | 3 | 6392 | 0 |
| DVD | 4 | 7197 | 0 |
| ASRV | 4 | 6176 | 0 |
| Average | 3 | 5113 | 0 |
As you can see these stocks had an average of 3 hedge funds with bullish positions and the average amount invested in these stocks was $5 million. That figure was $14 million in SUP’s case. Dover Motorsports, Inc. (NYSE:DVD) is the most popular stock in this table. On the other hand Orgenesis Inc. (NASDAQ:ORGS) is the least popular one with only 1 bullish hedge fund positions. Compared to these stocks Superior Industries International Inc. (NYSE:SUP) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately SUP wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on SUP were disappointed as the stock returned -3.1% during the first two months of the fourth quarter 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 70 percent of these stocks already outperformed the market in Q4.
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Disclosure: None. This article was originally published at Insider Monkey.
