Looking for high-potential stocks? Just follow the big players within the hedge fund industry. Why should you do so? Let’s take a brief look at what statistics have to say about hedge funds’ stock picking abilities to illustrate. The Standard and Poor’s 500 Index returned approximately 7.6% in the 12 months ending November 21, with more than 51% of the stocks in the index failing to beat the benchmark. Therefore, the odds that one will pin down a winner by randomly picking a stock are less than the odds in a fair coin-tossing game. Conversely, best performing hedge funds’ 30 preferred mid-cap stocks generated a return of 18% during the same 12-month period. Coincidence? It might happen to be so, but it is unlikely. Our research covering a 17-year period indicates that hedge funds’ stock picks generate superior risk-adjusted returns. That’s why we believe it is wise to check hedge fund activity before you invest your time or your savings on a stock like Sealed Air Corp (NYSE:SEE).
Sealed Air Corp (NYSE:SEE) has experienced a decrease in hedge fund interest lately. SEE was in 31 hedge funds’ portfolios at the end of the third quarter of 2016. There were 46 hedge funds in our database with SEE positions at the end of the previous quarter. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Ihs Markit Ltd. (NASDAQ:INFO), Arthur J. Gallagher & Co. (NYSE:AJG), and Tractor Supply Company (NASDAQ:TSCO) to gather more data points.
Follow Sealed Air Corp (NYSE:SEE)
Follow Sealed Air Corp (NYSE:SEE)
We care about hedge fund sentiment because historically hedge funds’ stock picks delivered strong risk adjusted returns. There are certain segments of the market where hedge funds’ stock picks performed much better than its benchmarks. For instance, the 30 most popular mid-cap stocks among the best performing hedge funds returned 18% over the last 12 months outpacing S&P 500 Index by more than 10 percentage points. We developed this strategy 2.5 years ago and started sharing its picks in our quarterly newsletter. It bested the S&P 500 Index ETFs by delivering a solid 39% vs. 22% gain for its benchmarks.
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What have hedge funds been doing with Sealed Air Corp (NYSE:SEE)?
At Q3’s end, a total of 31 of the hedge funds tracked by Insider Monkey were long this stock, down by 33% from the previous quarter. By comparison, 46 hedge funds held shares or bullish call options in SEE heading into this year. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to Insider Monkey’s hedge fund database, David Cohen and Harold Levy’s Iridian Asset Management has the biggest position in Sealed Air Corp (NYSE:SEE), worth close to $469 million, amounting to 4.1% of its total 13F portfolio. The second largest stake is held by Viking Global, led by Andreas Halvorsen, holding a $199.5 million position. Remaining members of the smart money with similar optimism encompass John Lykouretzos’ Hoplite Capital Management, D E Shaw, one of the biggest hedge funds in the world, and Robert Polak’s Anchor Bolt Capital. 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.
Judging by the fact that Sealed Air Corp (NYSE:SEE) has witnessed declining sentiment from the aggregate hedge fund industry, it’s easy to see that there exists a select few hedge funds who were dropping their positions entirely in the third quarter. It’s worth mentioning that Jean-Marie Eveillard’s First Eagle Investment Management dumped the biggest position of the 700 funds studied by Insider Monkey, comprising close to $211.1 million in stock. Dan Loeb’s fund, Third Point, also said goodbye to its stock, about $206.9 million worth.
Let’s now review hedge fund activity in other stocks similar to Sealed Air Corp (NYSE:SEE). These stocks are Ihs Markit Ltd. (NASDAQ:INFO), Arthur J. Gallagher & Co. (NYSE:AJG), Tractor Supply Company (NASDAQ:TSCO), and Nordstrom, Inc. (NYSE:JWN). All of these stocks’ market caps are similar to SEE’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| INFO | 30 | 1377078 | 11 |
| AJG | 12 | 86741 | -4 |
| TSCO | 25 | 475375 | -4 |
| JWN | 30 | 282280 | 4 |
As you can see these stocks had an average of 24 hedge funds with bullish positions and the average amount invested in these stocks was $555 million. That figure was $1.52 billion in SEE’s case. Ihs Markit Ltd. (NASDAQ:INFO) is the most popular stock in this table. On the other hand Arthur J. Gallagher & Co. (NYSE:AJG) is the least popular one with only 12 bullish hedge fund positions. Compared to these stocks Sealed Air Corp (NYSE:SEE) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.
Disclosure: None
