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. A whopping number of 13F filings filed with U.S. Securities and Exchange Commission has been processed by Insider Monkey so that individual investors can look at the overall hedge fund sentiment towards the stocks included in their watchlists. These freshly-submitted public filings disclose money managers’ equity positions as of the end of the three-month period that ended December 31, so let’s proceed with the discussion of the hedge fund sentiment on Stericycle Inc (NASDAQ:SRCL).
Stericycle Inc (NASDAQ:SRCL) has experienced an increase in activity from the world’s largest hedge funds lately. SRCL was in 24 hedge funds’ portfolios at the end of December. There were 20 hedge funds in our database with SRCL holdings at the end of the previous quarter. Our calculations also showed that SRCL 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).
To most shareholders, hedge funds are seen as worthless, outdated investment vehicles of years past. While there are more than 8000 funds trading at the moment, Our experts look at the bigwigs of this group, around 850 funds. These money managers command bulk of the hedge fund industry’s total capital, and by paying attention to their best equity investments, Insider Monkey has unsheathed several investment strategies that have historically defeated the S&P 500 index. Insider Monkey’s flagship short hedge fund strategy outpaced the S&P 500 short ETFs by around 20 percentage points a year since its inception in March 2017. Our portfolio of short stocks lost 35.3% since February 2017 (through March 3rd) even though the market was up more than 35% during the same period. We just shared a list of 7 short targets in our latest quarterly update .
David Blood of Generation Investment Management
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 analyze the fresh hedge fund action encompassing Stericycle Inc (NASDAQ:SRCL).
What does smart money think about Stericycle Inc (NASDAQ:SRCL)?
Heading into the first quarter of 2020, a total of 24 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 20% from the previous quarter. The graph below displays the number of hedge funds with bullish position in SRCL over the last 18 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Of the funds tracked by Insider Monkey, David Blood and Al Gore’s Generation Investment Management has the largest position in Stericycle Inc (NASDAQ:SRCL), worth close to $220.6 million, amounting to 1.4% of its total 13F portfolio. Sitting at the No. 2 spot is Ariel Investments, managed by John W. Rogers, which holds a $208.6 million position; the fund has 2.6% of its 13F portfolio invested in the stock. Remaining professional money managers with similar optimism comprise David Cohen and Harold Levy’s Iridian Asset Management, Ric Dillon’s Diamond Hill Capital and Brian Ashford-Russell and Tim Woolley’s Polar Capital. In terms of the portfolio weights assigned to each position Silver Heights Capital Management allocated the biggest weight to Stericycle Inc (NASDAQ:SRCL), around 17.84% of its 13F portfolio. Dorset Management is also relatively very bullish on the stock, earmarking 6.96 percent of its 13F equity portfolio to SRCL.
Consequently, specific money managers have jumped into Stericycle Inc (NASDAQ:SRCL) headfirst. Winton Capital Management, managed by David Harding, established the largest position in Stericycle Inc (NASDAQ:SRCL). Winton Capital Management had $4.9 million invested in the company at the end of the quarter. Matthew Hulsizer’s PEAK6 Capital Management also made a $1.8 million investment in the stock during the quarter. The following funds were also among the new SRCL investors: Qing Li’s Sciencast Management, Donald Sussman’s Paloma Partners, and Noam Gottesman’s GLG Partners.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Stericycle Inc (NASDAQ:SRCL) but similarly valued. These stocks are Quanta Services Inc (NYSE:PWR), Zynga Inc (NASDAQ:ZNGA), Capri Holdings Limited (NYSE:CPRI), and SolarWinds Corporation (NYSE:SWI). All of these stocks’ market caps resemble SRCL’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| PWR | 44 | 958990 | 12 |
| ZNGA | 48 | 953368 | 8 |
| CPRI | 40 | 1033626 | -1 |
| SWI | 15 | 2527306 | 2 |
| Average | 36.75 | 1368323 | 5.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 36.75 hedge funds with bullish positions and the average amount invested in these stocks was $1368 million. That figure was $832 million in SRCL’s case. Zynga Inc (NASDAQ:ZNGA) is the most popular stock in this table. On the other hand SolarWinds Corporation (NYSE:SWI) is the least popular one with only 15 bullish hedge fund positions. Stericycle Inc (NASDAQ:SRCL) 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 SRCL wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); SRCL investors were disappointed as the stock returned -33.8% 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 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.
