Many investors, including Paul Tudor Jones or Stan Druckenmiller, have been saying before the Q4 market crash that the stock market is overvalued due to a low interest rate environment that leads to companies swapping their equity for debt and focusing mostly on short-term performance such as beating the quarterly earnings estimates. In the first half of 2019, most investors recovered all of their Q4 losses as sentiment shifted and optimism dominated the US China trade negotiations. Nevertheless, many of the stocks that delivered strong returns in the first half still sport strong fundamentals and their gains were more related to the general market sentiment rather than their individual performance and hedge funds kept their bullish stance. In this article we will find out how hedge fund sentiment to Stifel Financial Corp. (NYSE:SF) changed recently.
Is Stifel Financial Corp. (NYSE:SF) the right investment to pursue these days? The best stock pickers are selling. The number of bullish hedge fund positions retreated by 1 lately. Our calculations also showed that SF isn’t among the 30 most popular stocks among hedge funds (view the video below).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
To most shareholders, hedge funds are perceived as slow, old financial vehicles of years past. While there are greater than 8000 funds with their doors open at the moment, Our experts choose to focus on the moguls of this club, approximately 750 funds. These money managers manage the majority of the hedge fund industry’s total asset base, and by monitoring their matchless stock picks, Insider Monkey has unsheathed several investment strategies that have historically outpaced the broader indices. Insider Monkey’s flagship hedge fund strategy surpassed the S&P 500 index by around 5 percentage points per annum since its inception in May 2014. We were able to generate large returns even by identifying short candidates. Our portfolio of short stocks lost 25.7% since February 2017 (through September 30th) even though the market was up more than 33% during the same period. We just shared a list of 10 short targets in our latest quarterly update .
Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. Let’s take a glance at the recent hedge fund action regarding Stifel Financial Corp. (NYSE:SF).
What does smart money think about Stifel Financial Corp. (NYSE:SF)?
At the end of the second quarter, a total of 15 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -6% from one quarter earlier. By comparison, 15 hedge funds held shares or bullish call options in SF a year ago. With the smart money’s sentiment swirling, there exists a few key hedge fund managers who were upping their stakes significantly (or already accumulated large positions).
More specifically, Fisher Asset Management was the largest shareholder of Stifel Financial Corp. (NYSE:SF), with a stake worth $107.3 million reported as of the end of March. Trailing Fisher Asset Management was Citadel Investment Group, which amassed a stake valued at $12.5 million. Balyasny Asset Management, Millennium Management, and GLG Partners were also very fond of the stock, giving the stock large weights in their portfolios.
Because Stifel Financial Corp. (NYSE:SF) has faced a decline in interest from the aggregate hedge fund industry, it’s easy to see that there exists a select few money managers that decided to sell off their entire stakes last quarter. It’s worth mentioning that Robert Pohly’s Samlyn Capital cut the biggest investment of the “upper crust” of funds monitored by Insider Monkey, valued at about $23.3 million in stock. Ravi Chopra’s fund, Azora Capital, also sold off its stock, about $15.8 million worth. These bearish behaviors are interesting, as total hedge fund interest was cut by 1 funds last quarter.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Stifel Financial Corp. (NYSE:SF) but similarly valued. These stocks are Healthcare Realty Trust Inc (NYSE:HR), Trex Company, Inc. (NYSE:TREX), Floor & Decor Holdings, Inc. (NYSE:FND), and Lumentum Holdings Inc (NASDAQ:LITE). All of these stocks’ market caps resemble SF’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| HR | 9 | 47376 | -5 |
| TREX | 19 | 185384 | -1 |
| FND | 21 | 381803 | -10 |
| LITE | 30 | 341777 | -1 |
| Average | 19.75 | 239085 | -4.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 19.75 hedge funds with bullish positions and the average amount invested in these stocks was $239 million. That figure was $161 million in SF’s case. Lumentum Holdings Inc (NASDAQ:LITE) is the most popular stock in this table. On the other hand Healthcare Realty Trust Inc (NYSE:HR) is the least popular one with only 9 bullish hedge fund positions. Stifel Financial Corp. (NYSE:SF) 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 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately SF wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); SF investors were disappointed as the stock returned -2.6% during the third quarter 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 many of these stocks already outperformed the market so far in 2019.
Disclosure: None. This article was originally published at Insider Monkey.
