Is Snap-on Incorporated (SNA) Going to Burn These Hedge Funds?

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 Melvin Capital’s recent GameStop losses). However, it is still a 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 a decrease in support from the world’s most elite money managers in recent months. Snap-on Incorporated (NYSE:SNA) was in 29 hedge funds’ portfolios at the end of the third quarter of 2021. The all time high for this statistic is 31. There were 31 hedge funds in our database with SNA holdings at the end of June. Our calculations also showed that SNA isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings).

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. With all of this in mind let’s take a peek at the fresh hedge fund action regarding Snap-on Incorporated (NYSE:SNA).

John Rogers of Ariel Investments

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

At third quarter’s end, a total of 29 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -6% from one quarter earlier. By comparison, 24 hedge funds held shares or bullish call options in SNA a year ago. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, Ariel Investments held the most valuable stake in Snap-on Incorporated (NYSE:SNA), which was worth $221.3 million at the end of the third quarter. On the second spot was AQR Capital Management which amassed $136.8 million worth of shares. Balyasny Asset Management, Interval Partners, and Citadel Investment Group 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 Ariel Investments allocated the biggest weight to Snap-on Incorporated (NYSE:SNA), around 2.02% of its 13F portfolio. North Fourth Asset Management is also relatively very bullish on the stock, setting aside 1.86 percent of its 13F equity portfolio to SNA.

Due to the fact that Snap-on Incorporated (NYSE:SNA) has experienced falling interest from the aggregate hedge fund industry, it’s safe to say that there lies a certain “tier” of funds that decided to sell off their entire stakes by the end of the third quarter. It’s worth mentioning that Greg Eisner’s Engineers Gate Manager said goodbye to the largest investment of all the hedgies tracked by Insider Monkey, totaling about $2.7 million in stock, and Jinghua Yan’s TwinBeech Capital was right behind this move, as the fund dumped about $2.6 million worth. These moves are intriguing to say the least, as total hedge fund interest dropped by 2 funds by the end of the third quarter.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Snap-on Incorporated (NYSE:SNA) but similarly valued. We will take a look at Targa Resources Corp (NYSE:TRGP), Robert Half International Inc. (NYSE:RHI), UWM Holdings Corporation (NYSE:UWMC), Morningstar, Inc. (NASDAQ:MORN), Centrais Elétricas Brasileiras S.A. – Eletrobrás (NYSE:EBR), Invesco Ltd. (NYSE:IVZ), and Kirkland Lake Gold Ltd. (NYSE:KL). This group of stocks’ market caps are similar to SNA’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 22.9 hedge funds with bullish positions and the average amount invested in these stocks was $629 million. That figure was $551 million in SNA’s case. Invesco Ltd. (NYSE:IVZ) is the most popular stock in this table. On the other hand Centrais Elétricas Brasileiras S.A. – Eletrobrás (NYSE:EBR) is the least popular one with only 6 bullish hedge fund positions. Snap-on Incorporated (NYSE:SNA) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for SNA is 67. 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 positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 28.6% in 2021 through November 30th and beat the market again by 5.6 percentage points. Unfortunately SNA wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on SNA were disappointed as the stock returned -0.8% since the end of September (through 11/30) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.

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