The successful funds run by legendary investors such as Dan Loeb and David Tepper make hundreds of millions of dollars for themselves and their investors by spending enormous resources doing research on small cap stocks that big investment banks don’t follow. Because of their pay structures, they have strong incentive to do the research necessary to beat the market. That’s why we pay close attention to what they think in small cap stocks. In this article, we take a closer look at Schweitzer-Mauduit International, Inc. (NYSE:SWM) from the perspective of those successful funds.
Is Schweitzer-Mauduit International, Inc. (NYSE:SWM) a good investment now? The smart money is in a pessimistic mood. The number of long hedge fund positions that are disclosed in regulatory 13F filings shrunk by 3 recently. SWM was in 14 hedge funds’ portfolios at the end of September. There were 17 hedge funds in our database with SWM holdings at the end of the June quarter. At the end of this article we will also compare SWM to other stocks including Zeltiq Aesthetics Inc (NASDAQ:ZLTQ), Theravance Biopharma Inc (NASDAQ:TBPH), and United Fire Group, Inc. (NASDAQ:UFCS) to get a better sense of its popularity.
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At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.
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How are hedge funds trading Schweitzer-Mauduit International, Inc. (NYSE:SWM)?
At Q3’s end, a total of 14 of the hedge funds tracked by Insider Monkey were bullish on this stock, a drop of 18% from the previous quarter. On the other hand, there were a total of 11 hedge funds with a bullish position in SWM at the beginning of this year, so hedge fund ownership is still up for the year. With hedge funds’ positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were increasing their stakes substantially (or already accumulated large positions).
Of the funds tracked by Insider Monkey, Renaissance Technologies, founded by Jim Simons, holds the number one position in Schweitzer-Mauduit International, Inc. (NYSE:SWM). Renaissance Technologies has a $20.7 million position in the stock. On Renaissance Technologies’s heels is Arrowstreet Capital, led by Peter Rathjens, Bruce Clarke and John Campbell, holding a $10.5 million position. Some other professional money managers with similar optimism comprise Chuck Royce’s Royce & Associates, Israel Englander’s Millennium Management, and Joel Greenblatt’s Gotham Asset Management. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.
Since Schweitzer-Mauduit International, Inc. (NYSE:SWM) has encountered declining sentiment from the aggregate hedge fund industry, we can see that there lies a certain “tier” of hedgies that elected to cut their entire stakes in the third quarter. Interestingly, Ken Griffin’s Citadel Investment Group cashed in the largest stake of all the investors studied by Insider Monkey, totaling about $1.2 million in stock, and Neil Chriss’ Hutchin Hill Capital was right behind this move, as the fund sold off about $1.1 million worth of shares.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Schweitzer-Mauduit International, Inc. (NYSE:SWM) but similarly valued. These stocks are Zeltiq Aesthetics Inc (NASDAQ:ZLTQ), Theravance Biopharma Inc (NASDAQ:TBPH), United Fire Group, Inc. (NASDAQ:UFCS), and Transportadora de Gas del Sur SA (ADR) (NYSE:TGS). This group of stocks’ market values are closest to SWM’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| ZLTQ | 22 | 290864 | 3 |
| TBPH | 12 | 696845 | 0 |
| UFCS | 9 | 21840 | -2 |
| TGS | 6 | 20610 | -1 |
As you can see these stocks had an average of 12 hedge funds with bullish positions and the average amount invested in these stocks was $258 million. That figure was $60 million in SWM’s case. Zeltiq Aesthetics Inc (NASDAQ:ZLTQ) is the most popular stock in this table. On the other hand Transportadora de Gas del Sur SA (ADR) (NYSE:TGS) is the least popular one with only 6 bullish hedge fund positions. Schweitzer-Mauduit International, Inc. (NYSE:SWM) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. In this regard ZLTQ might be a better candidate to consider taking a long position in.
Disclosure: None
