Here is What Hedge Funds Think About The L.S. Starrett Company (SCX)

In this article we will check out the progression of hedge fund sentiment towards The L.S. Starrett Company (NYSE:SCX) and determine whether it is a good investment right now. We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also employ numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.

Is The L.S. Starrett Company (NYSE:SCX) the right investment to pursue these days? The smart money was getting more optimistic. The number of bullish hedge fund positions rose by 1 lately. The L.S. Starrett Company (NYSE:SCX) was in 4 hedge funds’ portfolios at the end of the first quarter of 2021. The all time high for this statistic is 6. Our calculations also showed that SCX isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings). There were 3 hedge funds in our database with SCX positions at the end of the fourth quarter.

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 115 percentage points since March 2017 (see the details here). That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Mario Gabelli of GAMCO Investors

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, an activist hedge fund wants to buy this $28 biotech stock for $50. So, we recommended a long position to our monthly premium newsletter subscribers. We go through lists like the 10 best battery stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. With all of this in mind let’s take a glance at the recent hedge fund action surrounding The L.S. Starrett Company (NYSE:SCX).

Do Hedge Funds Think SCX Is A Good Stock To Buy Now?

At the end of March, a total of 4 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 33% from the previous quarter. By comparison, 4 hedge funds held shares or bullish call options in SCX a year ago. With hedge funds’ positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were upping their holdings significantly (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, Mario Gabelli’s GAMCO Investors has the number one position in The L.S. Starrett Company (NYSE:SCX), worth close to $3.2 million, accounting for less than 0.1%% of its total 13F portfolio. Coming in second is Renaissance Technologies, holding a $3.2 million position; less than 0.1%% of its 13F portfolio is allocated to the company. Some other hedge funds and institutional investors with similar optimism include David P. Cohen’s Minerva Advisors, Ken Griffin’s Citadel Investment Group and . In terms of the portfolio weights assigned to each position Minerva Advisors allocated the biggest weight to The L.S. Starrett Company (NYSE:SCX), around 0.21% of its 13F portfolio. GAMCO Investors is also relatively very bullish on the stock, earmarking 0.03 percent of its 13F equity portfolio to SCX.

As industrywide interest jumped, key hedge funds were leading the bulls’ herd. Citadel Investment Group, managed by Ken Griffin, initiated the biggest position in The L.S. Starrett Company (NYSE:SCX). Citadel Investment Group had $0.1 million invested in the company at the end of the quarter.

Let’s check out hedge fund activity in other stocks similar to The L.S. Starrett Company (NYSE:SCX). These stocks are Pioneer Power Solutions, Inc. (NASDAQ:PPSI), Precipio, Inc. (NASDAQ:PRPO), Skillful Craftsman Education Technology Limited (NASDAQ:EDTK), Mannatech, Inc. (NASDAQ:MTEX), Capitala Finance Corp (NASDAQ:CPTA), TRxADE HEALTH, Inc.. (NASDAQ:MEDS), and Condor Hospitality Trust, Inc. (NYSE:CDOR). All of these stocks’ market caps match SCX’s market cap.

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As you can see these stocks had an average of 1.9 hedge funds with bullish positions and the average amount invested in these stocks was $1 million. That figure was $7 million in SCX’s case. Pioneer Power Solutions, Inc. (NASDAQ:PPSI) is the most popular stock in this table. On the other hand Precipio, Inc. (NASDAQ:PRPO) is the least popular one with only 1 bullish hedge fund positions. Compared to these stocks The L.S. Starrett Company (NYSE:SCX) is more popular among hedge funds. Our overall hedge fund sentiment score for SCX is 76. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks returned 17.2% in 2021 through June 11th but still managed to beat the market by 3.3 percentage points. Hedge funds were also right about betting on SCX as the stock returned 38% since the end of March (through 6/11) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.

Disclosure: None. This article was originally published at Insider Monkey.