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 (read our latest 10 coronavirus predictions).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. We at Insider Monkey have gone over 835 13F filings that hedge funds and prominent investors are required to file by the SEC The 13F filings show the funds’ and investors’ portfolio positions as of December 31st. In this article, we look at what those funds think of Sasol Limited (NYSE:SSL) based on that data.
Sasol Limited (NYSE:SSL) investors should pay attention to a decrease in support from the world’s most elite money managers in recent months. Our calculations also showed that SSL 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.
Richard S. Pzena of Pzena 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. Now let’s take a glance at the recent hedge fund action encompassing Sasol Limited (NYSE:SSL).
How have hedgies been trading Sasol Limited (NYSE:SSL)?
At Q4’s end, a total of 7 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -22% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards SSL over the last 18 quarters. With hedgies’ capital changing hands, there exists a select group of notable hedge fund managers who were adding to their stakes meaningfully (or already accumulated large positions).
Among these funds, Renaissance Technologies held the most valuable stake in Sasol Limited (NYSE:SSL), which was worth $8.5 million at the end of the third quarter. On the second spot was Pzena Investment Management which amassed $3.2 million worth of shares. D E Shaw, Arrowstreet Capital, and Citadel Investment Group 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 Pzena Investment Management allocated the biggest weight to Sasol Limited (NYSE:SSL), around 0.02% of its 13F portfolio. Renaissance Technologies is also relatively very bullish on the stock, earmarking 0.01 percent of its 13F equity portfolio to SSL.
Since Sasol Limited (NYSE:SSL) has experienced a decline in interest from the smart money, it’s safe to say that there exists a select few funds that elected to cut their entire stakes by the end of the third quarter. It’s worth mentioning that Mike Vranos’s Ellington cut the largest stake of the “upper crust” of funds tracked by Insider Monkey, valued at about $0.2 million in stock. Ran Pang’s fund, Quantamental Technologies, also dropped its stock, about $0.1 million worth. These transactions are intriguing to say the least, as total hedge fund interest dropped by 2 funds by the end of the third quarter.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Sasol Limited (NYSE:SSL) but similarly valued. We will take a look at EXACT Sciences Corporation (NASDAQ:EXAS), Qorvo Inc (NASDAQ:QRVO), Twilio Inc. (NYSE:TWLO), and Annaly Capital Management, Inc. (NYSE:NLY). This group of stocks’ market caps are similar to SSL’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| EXAS | 41 | 914942 | 2 |
| QRVO | 45 | 1784158 | 7 |
| TWLO | 60 | 2100922 | -3 |
| NLY | 21 | 219868 | 5 |
| Average | 41.75 | 1254973 | 2.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 41.75 hedge funds with bullish positions and the average amount invested in these stocks was $1255 million. That figure was $16 million in SSL’s case. Twilio Inc. (NYSE:TWLO) is the most popular stock in this table. On the other hand Annaly Capital Management, Inc. (NYSE:NLY) is the least popular one with only 21 bullish hedge fund positions. Compared to these stocks Sasol Limited (NYSE:SSL) is even less popular than NLY. Hedge funds dodged a bullet by taking a bearish stance towards SSL. Our calculations showed that the top 20 most popular hedge fund stocks returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 22.3% in 2020 through March 16th but managed to beat the market by 3.2 percentage points. Unfortunately SSL wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); SSL investors were disappointed as the stock returned -86.3% 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 so far in Q1.
Disclosure: None. This article was originally published at Insider Monkey.
