Hedge Funds Have Never Been This Bullish On Sensata Technologies Holding plc (ST)

Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the second quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 5 years and analyze what the smart money thinks of Sensata Technologies Holding plc (NYSE:ST) based on that data and determine whether they were really smart about the stock.

Is Sensata Technologies Holding plc (NYSE:ST) a buy, sell, or hold? The smart money was taking a bullish view. The number of long hedge fund bets went up by 7 in recent months. Sensata Technologies Holding plc (NYSE:ST) was in 33 hedge funds’ portfolios at the end of June. The all time high for this statistics is 31. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that ST isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings and see the video for a quick look at the top 5 stocks). There were 26 hedge funds in our database with ST positions at the end of the first quarter.

Video: Watch our video about the top 5 most popular hedge fund stocks.

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 56 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.

Ric Dillon of Diamond Hill Capital

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, this “mom” trader turned $2000 into $2 million within 2 years. So, we are checking out her best trade idea of the month. Cannabis stocks are roaring back in 2020, which is why we are also checking out this under-the-radar stock. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. With all of this in mind let’s take a peek at the latest hedge fund action surrounding Sensata Technologies Holding plc (NYSE:ST).

Hedge fund activity in Sensata Technologies Holding plc (NYSE:ST)

At Q2’s end, a total of 33 of the hedge funds tracked by Insider Monkey were long this stock, a change of 27% from the previous quarter. By comparison, 21 hedge funds held shares or bullish call options in ST a year ago. With the smart money’s capital changing hands, there exists a select group of noteworthy hedge fund managers who were boosting their stakes substantially (or already accumulated large positions).

More specifically, Generation Investment Management was the largest shareholder of Sensata Technologies Holding plc (NYSE:ST), with a stake worth $459.8 million reported as of the end of September. Trailing Generation Investment Management was Orbis Investment Management, which amassed a stake valued at $148.7 million. Diamond Hill Capital, Adage Capital Management, and Impax Asset 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 Generation Investment Management allocated the biggest weight to Sensata Technologies Holding plc (NYSE:ST), around 2.65% of its 13F portfolio. Appian Way Asset Management is also relatively very bullish on the stock, designating 2.03 percent of its 13F equity portfolio to ST.

As aggregate interest increased, key money managers have jumped into Sensata Technologies Holding plc (NYSE:ST) headfirst. Adage Capital Management, managed by Phill Gross and Robert Atchinson, initiated the most outsized position in Sensata Technologies Holding plc (NYSE:ST). Adage Capital Management had $83.5 million invested in the company at the end of the quarter. Steve Cohen’s Point72 Asset Management also made a $36.9 million investment in the stock during the quarter. The following funds were also among the new ST investors: Paul Marshall and Ian Wace’s Marshall Wace LLP, Israel Englander’s Millennium Management, and Joe DiMenna’s ZWEIG DIMENNA PARTNERS.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Sensata Technologies Holding plc (NYSE:ST) but similarly valued. These stocks are Santander Consumer USA Holdings Inc (NYSE:SC), Bunge Limited (NYSE:BG), Aluminum Corp. of China Limited (NYSE:ACH), Store Capital Corporation (NYSE:STOR), Schrodinger, Inc. (NASDAQ:SDGR), Healthcare Trust Of America Inc (NYSE:HTA), and Sibanye Stillwater Limited (NYSE:SBSW). This group of stocks’ market valuations are similar to ST’s market valuation.

View table here if you experience formatting issues.

As you can see these stocks had an average of 18.1 hedge funds with bullish positions and the average amount invested in these stocks was $465 million. That figure was $1073 million in ST’s case. Bunge Limited (NYSE:BG) is the most popular stock in this table. On the other hand Aluminum Corp. of China Limited (NYSE:ACH) is the least popular one with only 6 bullish hedge fund positions. Sensata Technologies Holding plc (NYSE:ST) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for ST is 83.5. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 33% in 2020 through the end of August and beat the market by 23.2 percentage points. Unfortunately ST wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on ST were disappointed as the stock returned 11.8% 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 10 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.

Disclosure: None. This article was originally published at Insider Monkey.