Will the new coronavirus cause a recession in US in the next 6 months? On February 27th, we put the probability at 75% and we predicted that the market will decline by at least 20% in (Recession is Imminent: We Need A Travel Ban NOW). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards Atlas Corp. (NYSE:SSW).
Atlas Corp. (NYSE:SSW) shareholders have witnessed an increase in enthusiasm from smart money lately. Our calculations also showed that SSW isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).
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.
Bill Miller of Miller Value Partners
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. Keeping this in mind let’s take a look at the fresh hedge fund action regarding Atlas Corp. (NYSE:SSW).
What have hedge funds been doing with Atlas Corp. (NYSE:SSW)?
At Q4’s end, a total of 15 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 25% from the third quarter of 2019. The graph below displays the number of hedge funds with bullish position in SSW over the last 18 quarters. With hedgies’ sentiment swirling, there exists a select group of noteworthy hedge fund managers who were upping their holdings meaningfully (or already accumulated large positions).
More specifically, Fairfax Financial Holdings was the largest shareholder of Atlas Corp. (NYSE:SSW), with a stake worth $1095.6 million reported as of the end of September. Trailing Fairfax Financial Holdings was Renaissance Technologies, which amassed a stake valued at $33.4 million. Miller Value Partners, ExodusPoint Capital, and PEAK6 Capital Management 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 Fairfax Financial Holdings allocated the biggest weight to Atlas Corp. (NYSE:SSW), around 43.15% of its 13F portfolio. Qtron Investments is also relatively very bullish on the stock, dishing out 0.43 percent of its 13F equity portfolio to SSW.
With a general bullishness amongst the heavyweights, key money managers have jumped into Atlas Corp. (NYSE:SSW) headfirst. Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, established the most valuable position in Atlas Corp. (NYSE:SSW). Arrowstreet Capital had $1 million invested in the company at the end of the quarter. Peter Muller’s PDT Partners also made a $0.9 million investment in the stock during the quarter. The other funds with new positions in the stock are Ronald Hua’s Qtron Investments and Paul Cantor, Joseph Weiss, and Will Wurm’s Beech Hill Partners.
Let’s check out hedge fund activity in other stocks similar to Atlas Corp. (NYSE:SSW). These stocks are II-VI, Inc. (NASDAQ:IIVI), International Game Technology PLC (NYSE:IGT), Kennametal Inc. (NYSE:KMT), and Brady Corp (NYSE:BRC). This group of stocks’ market values resemble SSW’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| IIVI | 18 | 127641 | -14 |
| IGT | 30 | 211118 | 2 |
| KMT | 19 | 267785 | -8 |
| BRC | 15 | 212707 | -5 |
| Average | 20.5 | 204813 | -6.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 20.5 hedge funds with bullish positions and the average amount invested in these stocks was $205 million. That figure was $1150 million in SSW’s case. International Game Technology PLC (NYSE:IGT) is the most popular stock in this table. On the other hand Brady Corp (NYSE:BRC) is the least popular one with only 15 bullish hedge fund positions. Compared to these stocks Atlas Corp. (NYSE:SSW) is even less popular than BRC. Hedge funds dodged a bullet by taking a bearish stance towards SSW. Our calculations showed that the top 20 most popular hedge fund stocks 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 managed to beat the market by 5.5 percentage points. Unfortunately SSW wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); SSW investors were disappointed as the stock returned -49.9% 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 so far 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.
