Is SHC Stock A Buy or Sell?

Hedge Funds and other institutional investors have just completed filing their 13Fs with the Securities and Exchange Commission, revealing their equity portfolios as of the end of September. At Insider Monkey, we follow nearly 900 active hedge funds and notable investors and by analyzing their 13F filings, we can determine the stocks that they are collectively bullish on. One of their picks is Sotera Health Company (NASDAQ:SHC), so let’s take a closer look at the sentiment that surrounds it in the current quarter.

Is SHC stock a buy? Money managers were betting on the stock. Sotera Health Company (NASDAQ:SHC) was in 27 hedge funds’ portfolios at the end of the fourth quarter of 2020. Our calculations also showed that SHC isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings).

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 124 percentage points since March 2017 (see the details here).

James E. Flynn of Deerfield Management

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, auto parts business is a recession resistant business, so we are taking a closer look at this discount auto parts stock that is growing at a 196% annualized rate. We go through lists like the 15 best micro-cap stocks to buy now to identify the next stock with 10x upside potential. 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 website. Keeping this in mind we’re going to view the key hedge fund action encompassing Sotera Health Company (NASDAQ:SHC).

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

At Q4’s end, a total of 27 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 27 from the third quarter of 2020. On the other hand, there were a total of 0 hedge funds with a bullish position in SHC a year ago. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, Millennium Management was the largest shareholder of Sotera Health Company (NASDAQ:SHC), with a stake worth $62.3 million reported as of the end of December. Trailing Millennium Management was Citadel Investment Group, which amassed a stake valued at $56 million. Holocene Advisors, Deerfield Management, and Balyasny Asset Management 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 Pinz Capital allocated the biggest weight to Sotera Health Company (NASDAQ:SHC), around 2.22% of its 13F portfolio. Covalis Capital is also relatively very bullish on the stock, setting aside 1.39 percent of its 13F equity portfolio to SHC.

With a general bullishness amongst the heavyweights, specific money managers were leading the bulls’ herd. Millennium Management, managed by Israel Englander, created the largest position in Sotera Health Company (NASDAQ:SHC). Millennium Management had $62.3 million invested in the company at the end of the quarter. Ken Griffin’s Citadel Investment Group also made a $56 million investment in the stock during the quarter. The other funds with brand new SHC positions are Brandon Haley’s Holocene Advisors, James E. Flynn’s Deerfield Management, and Dmitry Balyasny’s Balyasny Asset Management.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Sotera Health Company (NASDAQ:SHC) but similarly valued. We will take a look at Jones Lang LaSalle Inc (NYSE:JLL), American Financial Group, Inc. (NYSE:AFG), Ralph Lauren Corporation (NYSE:RL), Euronet Worldwide, Inc. (NASDAQ:EEFT), Quidel Corporation (NASDAQ:QDEL), The Gap Inc. (NYSE:GPS), and Gerdau SA (NYSE:GGB). This group of stocks’ market valuations are closest to SHC’s market valuation.

View table here if you experience formatting issues.

As you can see these stocks had an average of 28 hedge funds with bullish positions and the average amount invested in these stocks was $572 million. That figure was $321 million in SHC’s case. The Gap Inc. (NYSE:GPS) is the most popular stock in this table. On the other hand Gerdau SA (NYSE:GGB) is the least popular one with only 15 bullish hedge fund positions. Sotera Health Company (NASDAQ:SHC) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for SHC is 51.7. 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. 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 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks gained 12.3% in 2021 through April 19th and surpassed the market again by 0.9 percentage points. Unfortunately SHC wasn’t nearly as popular as these 30 stocks (hedge fund sentiment was quite bearish); SHC investors were disappointed as the stock returned -5% since the end of December (through 4/19) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 30 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.

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