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. Before we spend countless hours researching a company, we like to analyze what insiders, hedge funds and billionaire investors think of the stock first. This is a necessary first step in our investment process because our research has shown that the elite investors’ consensus returns have been exceptional. In the following paragraphs, we find out what the billionaire investors and hedge funds think of Seaboard Corporation (NYSE:SEB).
Seaboard Corporation (NYSE:SEB) was in 18 hedge funds’ portfolios at the end of the fourth quarter of 2019. SEB investors should pay attention to an increase in hedge fund interest of late. There were 16 hedge funds in our database with SEB positions at the end of the previous quarter. Our calculations also showed that SEB 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).
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 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 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.
Wall Street Bull
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 go over the fresh hedge fund action regarding Seaboard Corporation (NYSE:SEB).
What have hedge funds been doing with Seaboard Corporation (NYSE:SEB)?
At the end of the fourth quarter, a total of 18 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 13% from one quarter earlier. On the other hand, there were a total of 10 hedge funds with a bullish position in SEB a year ago. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Kahn Brothers held the most valuable stake in Seaboard Corporation (NYSE:SEB), which was worth $54.5 million at the end of the third quarter. On the second spot was Renaissance Technologies which amassed $29.9 million worth of shares. Sabrepoint Capital, Brightlight Capital, and Rubric 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 Sabrepoint Capital allocated the biggest weight to Seaboard Corporation (NYSE:SEB), around 9.04% of its 13F portfolio. Brightlight Capital is also relatively very bullish on the stock, setting aside 7.8 percent of its 13F equity portfolio to SEB.
As one would reasonably expect, specific money managers were leading the bulls’ herd. Brightlight Capital, managed by Vadim Rubinchik, initiated the most valuable position in Seaboard Corporation (NYSE:SEB). Brightlight Capital had $10.3 million invested in the company at the end of the quarter. Ryan Tolkin (CIO)’s Schonfeld Strategic Advisors also initiated a $5.1 million position during the quarter.
Let’s go over hedge fund activity in other stocks similar to Seaboard Corporation (NYSE:SEB). These stocks are MGIC Investment Corporation (NYSE:MTG), ONE Gas Inc (NYSE:OGS), Helmerich & Payne, Inc. (NYSE:HP), and Webster Financial Corporation (NYSE:WBS). All of these stocks’ market caps are similar to SEB’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| MTG | 37 | 604228 | -4 |
| OGS | 16 | 66793 | -4 |
| HP | 33 | 633780 | 4 |
| WBS | 24 | 472727 | -1 |
| Average | 27.5 | 444382 | -1.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 27.5 hedge funds with bullish positions and the average amount invested in these stocks was $444 million. That figure was $154 million in SEB’s case. MGIC Investment Corporation (NYSE:MTG) is the most popular stock in this table. On the other hand ONE Gas Inc (NYSE:OGS) is the least popular one with only 16 bullish hedge fund positions. Seaboard Corporation (NYSE:SEB) 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 SEB wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); SEB investors were disappointed as the stock returned -34.1% 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.
