Is SRCL Stock A Buy or Sell?

In this article we will analyze whether Stericycle Inc (NASDAQ:SRCL) is a good investment right now by following the lead of some of the best investors in the world and piggybacking their ideas. There’s no better way to get these firms’ immense resources and analytical capabilities working for us than to follow their lead into their best ideas. While not all of these picks will be winners, our research shows that these picks historically outperformed the market by double digits annually.

Is SRCL stock a buy? Stericycle Inc (NASDAQ:SRCL) shares haven’t seen a lot of action during the second quarter. Overall, hedge fund sentiment was unchanged. The stock was in 25 hedge funds’ portfolios at the end of the fourth quarter of 2020. Our calculations also showed that SRCL isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings). At the end of this article we will also compare SRCL to other stocks including Capri Holdings Limited (NYSE:CPRI), CDK Global Inc (NASDAQ:CDK), and Reynolds Consumer Products Inc. (NASDAQ:REYN) to get a better sense of its popularity.

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).

John Rogers of Ariel Investments

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. Now let’s go over the recent hedge fund action surrounding Stericycle Inc (NASDAQ:SRCL).

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

At fourth quarter’s end, a total of 25 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from one quarter earlier. By comparison, 24 hedge funds held shares or bullish call options in SRCL a year ago. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in Stericycle Inc (NASDAQ:SRCL) was held by Ariel Investments, which reported holding $214.9 million worth of stock at the end of December. It was followed by Southpoint Capital Advisors with a $173.3 million position. Other investors bullish on the company included Iridian Asset Management, Diamond Hill Capital, and Markel Gayner Asset Management. In terms of the portfolio weights assigned to each position Silver Heights Capital Management allocated the biggest weight to Stericycle Inc (NASDAQ:SRCL), around 14.11% of its 13F portfolio. Southpoint Capital Advisors is also relatively very bullish on the stock, earmarking 3.02 percent of its 13F equity portfolio to SRCL.

Judging by the fact that Stericycle Inc (NASDAQ:SRCL) has experienced falling interest from hedge fund managers, it’s safe to say that there is a sect of fund managers who sold off their full holdings heading into Q1. At the top of the heap, David Blood and Al Gore’s Generation Investment Management cut the biggest investment of the “upper crust” of funds monitored by Insider Monkey, totaling an estimated $209.4 million in stock, and David M. Knott’s Dorset Management was right behind this move, as the fund sold off about $10.1 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s now take a look at hedge fund activity in other stocks similar to Stericycle Inc (NASDAQ:SRCL). We will take a look at Capri Holdings Limited (NYSE:CPRI), CDK Global Inc (NASDAQ:CDK), Reynolds Consumer Products Inc. (NASDAQ:REYN), CACI International Inc (NYSE:CACI), Cyberark Software Ltd (NASDAQ:CYBR), Jefferies Financial Group Inc. (NYSE:JEF), and Blueprint Medicines Corporation (NASDAQ:BPMC). This group of stocks’ market valuations match SRCL’s market valuation.

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As you can see these stocks had an average of 30.4 hedge funds with bullish positions and the average amount invested in these stocks was $636 million. That figure was $670 million in SRCL’s case. Capri Holdings Limited (NYSE:CPRI) is the most popular stock in this table. On the other hand Reynolds Consumer Products Inc. (NASDAQ:REYN) is the least popular one with only 18 bullish hedge fund positions. Stericycle Inc (NASDAQ:SRCL) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for SRCL is 41.6. 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 SRCL wasn’t nearly as popular as these 30 stocks (hedge fund sentiment was quite bearish); SRCL investors were disappointed as the stock returned -1.3% 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.