Is Snap-on Incorporated (SNA) A Good Stock To Buy?

We know that hedge funds generate strong, risk-adjusted returns over the long run, therefore imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, smart money investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do (like Ackman’s recent Valeant losses). However, it is still good idea to keep an eye on hedge fund activity. With this in mind, as the current round of 13F filings has just ended, let’s examine the smart money sentiment towards Snap-on Incorporated (NYSE:SNA).

Snap-on Incorporated (NYSE:SNA) has seen an increase in activity from the world’s largest hedge funds lately. SNA was in 31 hedge funds’ portfolios at the end of September. There were 25 hedge funds in our database with SNA holdings 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 Voya Financial Inc (NYSE:VOYA), Alkermes Plc (NASDAQ:ALKS), and Shaw Communications Inc (USA) (NYSE:SJR) to gather more data points.

In the 21st century investor’s toolkit there are plenty of metrics that market participants put to use to analyze their stock investments. A pair of the less utilized metrics are hedge fund and insider trading moves. our researchers have shown that, historically, those who follow the top picks of the elite investment managers can outpace the S&P 500 by a very impressive amount (see the details here).

Now, let’s view the latest action surrounding Snap-on Incorporated (NYSE:SNA).

What have hedge funds been doing with Snap-on Incorporated (NYSE:SNA)?

At Q3’s end, a total of 31 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 24% from the previous quarter. With hedge funds’ capital changing hands, there exists a few notable hedge fund managers who were boosting their holdings considerably (or already accumulated large positions).

Of the funds tracked by Insider Monkey, East Side Capital (RR Partners), managed by Steven Richman, holds the most valuable position in Snap-on Incorporated (NYSE:SNA). East Side Capital (RR Partners) has an $144 million position in the stock, comprising 6.2% of its 13F portfolio. The second largest stake is held by Jeffrey Gates of Gates Capital Management, with a $66.7 million position; the fund has 2.6% of its 13F portfolio invested in the stock. Some other members of the smart money that are bullish include Cliff Asness’s AQR Capital Management, Ben Gambill’s Tiger Eye Capital and D. E. Shaw’s D E Shaw.

With a general bullishness amongst the heavyweights, key hedge funds were leading the bulls’ herd. Select Equity Group, managed by Robert Joseph Caruso, created the biggest position in Snap-on Incorporated (NYSE:SNA). Select Equity Group had $25.9 million invested in the company at the end of the quarter. Matthew Tewksbury’s Stevens Capital Management also initiated a $2 million position during the quarter. The following funds were also among the new SNA investors: George Hall’s Clinton Group, Colin Hall and James Davidson’s Long Oar Global Investors, and Ray Dalio’s Bridgewater Associates.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Snap-on Incorporated (NYSE:SNA) but similarly valued. These stocks are Voya Financial Inc (NYSE:VOYA), Alkermes Plc (NASDAQ:ALKS), Shaw Communications Inc (USA) (NYSE:SJR), and Darden Restaurants, Inc. (NYSE:DRI). This group of stocks’ market caps are closest to SNA’s market cap.

As you can see these stocks had an average of 26.25 hedge funds with bullish positions and the average amount invested in these stocks was $782 million, higher than the $586 million figure in SNA’s case. Voya Financial Inc (NYSE:VOYA) is the most popular stock in this table with 35 long positions, while Shaw Communications Inc (USA) (NYSE:SJR) is the least popular one. Snap-on Incorporated (NYSE:SNA) 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 VOYA might be a better candidate to consider a long position.