Most investors tend to think that hedge funds and other asset managers are worthless, as they cannot beat even simple index fund portfolios. In fact, most people expect hedge funds to compete with and outperform the bull market that we have witnessed over the past few years. However, hedge funds are generally partially hedged and aim at delivering attractive risk-adjusted returns rather than following the ups and downs of equity markets hoping that they will outperform the broader market. Our research shows that hedge funds do have great stock picking skills, so let’s take a glance at the smart money sentiment towards Sonoco Products Company (NYSE:SON).
After hedge fund sentiment soured on Sonoco during the prior 2 quarters, it rebounded in a big way during Q2, rising by 43% and early filings for Q3 are showing signs of more buying. One of the new buyers in Q2 was billionaire and bestselling author Ray Dalio’s Bridgewater Associates (8,148 shares). With its 36 year run of paying dividends, Sonoco placed 15th on our list of the 25 Best Dividend Stocks for Retirement.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s flagship best performing hedge funds strategy returned 17.4% year to date and outperformed the market by more than 14 percentage points this year. This strategy also outperformed the market by 3 percentage points in the fourth quarter despite the market volatility (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Hedge fund activity in Sonoco Products Company (NYSE:SON)
At Q3’s end, a total of 20 of the hedge funds tracked by Insider Monkey were long this stock, a 43% jump from one quarter earlier. The graph below displays the number of hedge funds with bullish position in SON over the last 6 quarters. With the smart money’s capital changing hands, there exists a few notable hedge fund managers who were increasing their holdings significantly (or already accumulated large positions).
Impax Asset Management was the largest shareholder of Sonoco Products Company (NYSE:SON), with a stake worth $25.7 million reported as of the end of June. Trailing Impax Asset Management was Millennium Management, which amassed a stake valued at $17.5 million. Zebra Capital Management, Navellier & Associates, and Gotham Asset Management were also very fond of the stock, giving the stock large weights in their portfolios.
As one would reasonably expect, specific money managers were leading the bulls’ herd. Navellier & Associates, managed by Louis Navellier, created a new position in Sonoco Products Company (NYSE:SON) valued at $2.2 million as of the end of the quarter. Joel Greenblatt’s Gotham Asset Management also initiated a $7.2 million position during the quarter. The following funds were also among the new SON investors: Daniel Arbess’ Perella Weinberg Partners, Noam Gottesman’s GLG Partners, and Benjamin A. Smith’s Laurion Capital Management.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Sonoco Products Company (NYSE:SON) but similarly valued. We will take a look at Loxo Oncology Inc (NASDAQ:LOXO), Grupo Aeroportuario del Pacifico (ADR) (NYSE:PAC), Empire State Realty Trust Inc (NYSE:ESRT), and Oshkosh Corporation (NYSE:OSK). This group of stocks’ market values resemble SON’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| LOXO | 32 | 1149408 | 10 |
| PAC | 3 | 60107 | -2 |
| ESRT | 17 | 234702 | 2 |
| OSK | 20 | 515430 | -6 |
As you can see these stocks had an average of 18 hedge funds with bullish positions and the average amount invested in these stocks was $490 million. That figure was $110 million in SON’s case. Loxo Oncology Inc (NASDAQ:LOXO) is the most popular stock in this table. On the other hand Grupo Aeroportuario del Pacifico (ADR) (NYSE:PAC) is the least popular one with only 3 bullish hedge fund positions. Sonoco Products Company (NYSE:SON) is not the most popular stock in this group but hedge fund interest is still above average and rising. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. In this regard LOXO might be a better candidate to consider a long position in, though we recommend dividend investors consider adding Sonoco to their income generating portfolio.
Disclosure: None. This article was originally published at Insider Monkey.
