At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (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. In this article, we will take a closer look at hedge fund sentiment towards Stantec Inc. (NYSE:STN) at the end of the first quarter and determine whether the smart money was really smart about this stock.
Stantec Inc. (NYSE:STN) investors should be aware of an increase in support from the world’s most elite money managers recently. Our calculations also showed that STN isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).
Video: Watch our video about the top 5 most popular hedge fund stocks.
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 58 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 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Blair Levinsky of Waratah Capital Advisors
At Insider Monkey we scour multiple sources to uncover the next great investment idea. There is a lot of volatility in the markets and this presents amazing investment opportunities from time to time. For example, this trader claims to deliver juiced up returns with one trade a week, so we are checking out his highest conviction idea. A second trader claims to score lucrative profits by utilizing a “weekend trading strategy”, so we look into his strategy’s picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We recently recommended several stocks partly inspired by legendary Bill Miller’s investor letter. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. Now we’re going to review the fresh hedge fund action regarding Stantec Inc. (NYSE:STN).
What have hedge funds been doing with Stantec Inc. (NYSE:STN)?
At Q1’s end, a total of 12 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 33% from the previous quarter. The graph below displays the number of hedge funds with bullish position in STN over the last 18 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Arrowstreet Capital was the largest shareholder of Stantec Inc. (NYSE:STN), with a stake worth $16.1 million reported as of the end of September. Trailing Arrowstreet Capital was Two Sigma Advisors, which amassed a stake valued at $8.4 million. Renaissance Technologies, D E Shaw, and Marshall Wace LLP 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 Galibier Capital Management allocated the biggest weight to Stantec Inc. (NYSE:STN), around 0.94% of its 13F portfolio. Waratah Capital Advisors is also relatively very bullish on the stock, dishing out 0.16 percent of its 13F equity portfolio to STN.
As one would reasonably expect, key hedge funds were breaking ground themselves. GLG Partners, managed by Noam Gottesman, assembled the most valuable position in Stantec Inc. (NYSE:STN). GLG Partners had $1.4 million invested in the company at the end of the quarter. Brad Dunkley and Blair Levinsky’s Waratah Capital Advisors also made a $0.9 million investment in the stock during the quarter. The other funds with brand new STN positions are Peter Muller’s PDT Partners and Joel Greenblatt’s Gotham Asset Management.
Let’s check out hedge fund activity in other stocks similar to Stantec Inc. (NYSE:STN). We will take a look at Brixmor Property Group Inc (NYSE:BRX), Affiliated Managers Group, Inc. (NYSE:AMG),Grupo Aeroportuario del Sureste, S. A. B. de C. V. (NYSE:ASR), and Hanesbrands Inc. (NYSE:HBI). This group of stocks’ market valuations match STN’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| BRX | 28 | 79124 | 12 |
| AMG | 27 | 309620 | -11 |
| ASR | 4 | 31709 | -6 |
| HBI | 36 | 364607 | -4 |
| Average | 23.75 | 196265 | -2.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 23.75 hedge funds with bullish positions and the average amount invested in these stocks was $196 million. That figure was $53 million in STN’s case. Hanesbrands Inc. (NYSE:HBI) is the most popular stock in this table. On the other hand Grupo Aeroportuario del Sureste, S. A. B. de C. V. (NYSE:ASR) is the least popular one with only 4 bullish hedge fund positions. Stantec Inc. (NYSE:STN) is not the least popular stock in this group but hedge fund interest is still below average. 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 12.3% in 2020 through June 30th but beat the market by 15.5 percentage points. A small number of hedge funds were also right about betting on STN, though not to the same extent, as the stock returned 21.2% during the second quarter and outperformed the market.
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Disclosure: None. This article was originally published at Insider Monkey.
