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. In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. Insider Monkey finished processing 835 13F filings submitted by hedge funds and prominent investors. These filings show these funds’ portfolio positions as of December 31st, 2019. 0
State Street Corporation (NYSE:STT) has seen an increase in hedge fund sentiment of late. STT was in 45 hedge funds’ portfolios at the end of December. There were 37 hedge funds in our database with STT positions at the end of the previous quarter. Our calculations also showed that STT isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video below for Q3 rankings).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research was 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’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.
Mario Gabelli of GAMCO Investors
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. With all of this in mind let’s take a peek at the new hedge fund action surrounding State Street Corporation (NYSE:STT).
How have hedgies been trading State Street Corporation (NYSE:STT)?
At the end of the fourth quarter, a total of 45 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 22% from the third quarter of 2019. Below, you can check out the change in hedge fund sentiment towards STT over the last 18 quarters. With the smart money’s capital changing hands, there exists a select group of noteworthy hedge fund managers who were increasing their holdings meaningfully (or already accumulated large positions).
The largest stake in State Street Corporation (NYSE:STT) was held by Yacktman Asset Management, which reported holding $314.6 million worth of stock at the end of September. It was followed by Citadel Investment Group with a $155 million position. Other investors bullish on the company included Two Sigma Advisors, GAMCO Investors, and D E Shaw. In terms of the portfolio weights assigned to each position Azora Capital allocated the biggest weight to State Street Corporation (NYSE:STT), around 6.41% of its 13F portfolio. Yacktman Asset Management is also relatively very bullish on the stock, designating 3.98 percent of its 13F equity portfolio to STT.
With a general bullishness amongst the heavyweights, some big names have been driving this bullishness. Alyeska Investment Group, managed by Anand Parekh, assembled the most outsized position in State Street Corporation (NYSE:STT). Alyeska Investment Group had $61.5 million invested in the company at the end of the quarter. Louis Bacon’s Moore Global Investments also made a $49.4 million investment in the stock during the quarter. The other funds with brand new STT positions are Robert Pohly’s Samlyn Capital, Daniel Johnson’s Gillson Capital, and Sander Gerber’s Hudson Bay Capital Management.
Let’s now review hedge fund activity in other stocks similar to State Street Corporation (NYSE:STT). These stocks are The Williams Companies, Inc. (NYSE:WMB), China Unicom (Hong Kong) Limited (NYSE:CHU), Chunghwa Telecom Co., Ltd (NYSE:CHT), and Republic Services, Inc. (NYSE:RSG). This group of stocks’ market caps are closest to STT’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| WMB | 40 | 958886 | 0 |
| CHU | 11 | 60557 | 3 |
| CHT | 4 | 121280 | -1 |
| RSG | 26 | 684129 | -9 |
| Average | 20.25 | 456213 | -1.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 20.25 hedge funds with bullish positions and the average amount invested in these stocks was $456 million. That figure was $1287 million in STT’s case. The Williams Companies, Inc. (NYSE:WMB) is the most popular stock in this table. On the other hand Chunghwa Telecom Co., Ltd (NYSE:CHT) is the least popular one with only 4 bullish hedge fund positions. Compared to these stocks State Street Corporation (NYSE:STT) is more popular among hedge funds. 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 11.7% in 2020 through March 11th and still beat the market by 3.1 percentage points. Unfortunately STT wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on STT were disappointed as the stock returned -31.5% during the first two months of 2020 (through March 11th) 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.
Disclosure: None. This article was originally published at Insider Monkey.
