We are still in an overall bull market and many stocks that smart money investors were piling into surged through the end of November. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 54% and 51% respectively. Hedge funds’ top 3 stock picks returned 41.7% this year and beat the S&P 500 ETFs by 14 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like StarTek, Inc. (NYSE:SRT).
Is StarTek, Inc. (NYSE:SRT) an exceptional investment now? The smart money is betting on the stock. The number of long hedge fund positions went up by 1 lately. Our calculations also showed that SRT isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). SRT was in 4 hedge funds’ portfolios at the end of September. There were 3 hedge funds in our database with SRT holdings at the end of the previous quarter.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
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’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 27.8% through November 21, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
David Harding of Winton Capital Management
We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We even check out this option genius’ weekly trade ideas. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager’s investor letter and the stock already gained 20 percent. With all of this in mind let’s review the new hedge fund action encompassing StarTek, Inc. (NYSE:SRT).
What does smart money think about StarTek, Inc. (NYSE:SRT)?
At the end of the third quarter, a total of 4 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 33% from the second quarter of 2019. The graph below displays the number of hedge funds with bullish position in SRT over the last 17 quarters. With the smart money’s positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were boosting their stakes considerably (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, Renaissance Technologies holds the biggest position in StarTek, Inc. (NYSE:SRT). Renaissance Technologies has a $4.3 million position in the stock, comprising less than 0.1%% of its 13F portfolio. The second most bullish fund manager is Winton Capital Management, managed by David Harding, which holds a $0.8 million position; less than 0.1%% of its 13F portfolio is allocated to the company. Some other professional money managers that are bullish comprise Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, Israel Englander’s Millennium Management and . In terms of the portfolio weights assigned to each position Winton Capital Management allocated the biggest weight to StarTek, Inc. (NYSE:SRT), around 0.01% of its 13F portfolio. Renaissance Technologies is also relatively very bullish on the stock, earmarking 0.0036 percent of its 13F equity portfolio to SRT.
As industrywide interest jumped, specific money managers have jumped into StarTek, Inc. (NYSE:SRT) headfirst. Winton Capital Management, managed by David Harding, initiated the most valuable position in StarTek, Inc. (NYSE:SRT). Winton Capital Management had $0.8 million invested in the company at the end of the quarter. Israel Englander’s Millennium Management also made a $0.4 million investment in the stock during the quarter.
Let’s now take a look at hedge fund activity in other stocks similar to StarTek, Inc. (NYSE:SRT). These stocks are Cambium Networks Corporation (NASDAQ:CMBM), Liquidity Services, Inc. (NASDAQ:LQDT), Recro Pharma Inc (NASDAQ:REPH), and Satsuma Pharmaceuticals, Inc. (NASDAQ:STSA). All of these stocks’ market caps are closest to SRT’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CMBM | 7 | 6898 | -4 |
| LQDT | 8 | 33497 | 1 |
| REPH | 12 | 50206 | 1 |
| STSA | 7 | 108938 | 7 |
| Average | 8.5 | 49885 | 1.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 8.5 hedge funds with bullish positions and the average amount invested in these stocks was $50 million. That figure was $6 million in SRT’s case. Recro Pharma Inc (NASDAQ:REPH) is the most popular stock in this table. On the other hand Cambium Networks Corporation (NASDAQ:CMBM) is the least popular one with only 7 bullish hedge fund positions. Compared to these stocks StarTek, Inc. (NYSE:SRT) is even less popular than CMBM. Hedge funds clearly dropped the ball on SRT as the stock delivered strong returns, though hedge funds’ consensus picks still generated respectable returns. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. A small number of hedge funds were also right about betting on SRT as the stock returned 22.7% during the fourth quarter (through the end of November) and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.
