The first quarter was a breeze as Powell pivoted, and China seemed eager to reach a deal with Trump. Both the S&P 500 and Russell 2000 delivered very strong gains as a result, with the Russell 2000, which is composed of smaller companies, outperforming the large-cap stocks slightly during the first quarter. Unfortunately sentiment shifted in May and August as this time China pivoted and Trump put more pressure on China by increasing tariffs. Fourth quarter brought optimism to the markets and hedge funds’ top 20 stock picks performed spectacularly in this volatile environment. These stocks delivered a total gain of 34.7% through November 22nd, vs. a gain of 26.2% for the S&P 500 ETF. In this article we will look at how this market volatility affected the sentiment of hedge funds towards Sirius International Insurance Group, Ltd. (NASDAQ:SG), and what that likely means for the prospects of the company and its stock.
Sirius International Insurance Group, Ltd. (NASDAQ:SG) has experienced an increase in activity from the world’s largest hedge funds of late. SG was in 3 hedge funds’ portfolios at the end of September. There were 1 hedge funds in our database with SG holdings at the end of the previous quarter. Our calculations also showed that SG isn’t among the 30 most popular stocks among hedge funds.
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 has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
David E. Shaw of D.E. Shaw
Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world’s most bearish hedge fund that’s more convinced than ever that a crash is coming, our long-short investment strategy doesn’t rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds‘ buy/sell signals. We’re going to take a gander at the recent hedge fund action encompassing Sirius International Insurance Group, Ltd. (NASDAQ:SG).
What does smart money think about Sirius International Insurance Group, Ltd. (NASDAQ:SG)?
Heading into the fourth quarter of 2019, a total of 3 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 200% from the second quarter of 2019. The graph below displays the number of hedge funds with bullish position in SG over the last 17 quarters. With the smart money’s capital changing hands, there exists a select group of notable hedge fund managers who were increasing their stakes significantly (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, Anand Parekh’s Alyeska Investment Group has the biggest call position in Sirius International Insurance Group, Ltd. (NASDAQ:SG), worth close to $3.8 million, amounting to 0.1% of its total 13F portfolio. Coming in second is D E Shaw, led by David E. Shaw, holding a $2.1 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Some other hedge funds and institutional investors with similar optimism encompass John Murphy’s Levin Easterly Partners, Mario Gabelli’s GAMCO Investors and . In terms of the portfolio weights assigned to each position Alyeska Investment Group allocated the biggest weight to Sirius International Insurance Group, Ltd. (NASDAQ:SG), around 0.06% of its portfolio. Levin Easterly Partners is also relatively very bullish on the stock, setting aside 0.01 percent of its 13F equity portfolio to SG.
As aggregate interest increased, key hedge funds have jumped into Sirius International Insurance Group, Ltd. (NASDAQ:SG) headfirst. Levin Easterly Partners, managed by John Murphy, established the biggest position in Sirius International Insurance Group, Ltd. (NASDAQ:SG). Levin Easterly Partners had $0.2 million invested in the company at the end of the quarter. Mario Gabelli’s GAMCO Investors also made a $0.1 million investment in the stock during the quarter.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Sirius International Insurance Group, Ltd. (NASDAQ:SG) but similarly valued. We will take a look at Spectrum Pharmaceuticals, Inc. (NASDAQ:SPPI), ATN International, Inc. (NASDAQ:ATNI), Antero Resources Corp (NYSE:AR), and Century Communities, Inc (NYSE:CCS). This group of stocks’ market valuations are similar to SG’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| SPPI | 7 | 32036 | -2 |
| ATNI | 9 | 65615 | 0 |
| AR | 26 | 354639 | -4 |
| CCS | 23 | 158792 | 6 |
| Average | 16.25 | 152771 | 0 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 16.25 hedge funds with bullish positions and the average amount invested in these stocks was $153 million. That figure was $2 million in SG’s case. Antero Resources Corp (NYSE:AR) is the most popular stock in this table. On the other hand Spectrum Pharmaceuticals, Inc. (NASDAQ:SPPI) is the least popular one with only 7 bullish hedge fund positions. Compared to these stocks Sirius International Insurance Group, Ltd. (NASDAQ:SG) is even less popular than SPPI. Hedge funds dodged a bullet by taking a bearish stance towards SG. Our calculations showed that the top 20 most popular hedge fund stocks returned 34.7% in 2019 through November 22nd and outperformed the S&P 500 ETF (SPY) by 8.5 percentage points. Unfortunately SG wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); SG investors were disappointed as the stock returned 0.4% during the fourth quarter (through 11/22) 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 70 percent of these stocks already outperformed the market so far in Q4.
Disclosure: None. This article was originally published at Insider Monkey.