Like everyone else, elite investors make mistakes. Some of their top consensus picks, such as Valeant and SunEdison, have not done well during the last 12 months due to various reasons. Nevertheless, the data show elite investors’ consensus picks have done well on average. The top 30 mid-cap stocks (market caps between $1 billion and $10 billion) among hedge funds delivered an average return of 18% during the last four quarters. S&P 500 Index returned only 7.6% during the same period and less than 49% of its constituents managed to beat this return. Because their consensus picks have done well, we pay attention to what elite funds and billionaire investors think before doing extensive research on a stock. In this article, we take a closer look at State Street Corp (NYSE:STT) from the perspective of those elite funds.
State Street Corp (NYSE:STT) has seen a decrease in activity from the world’s largest hedge funds of late. There were 33 hedge funds in our database with STT positions 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 Vertex Pharmaceuticals Incorporated (NASDAQ:VRTX), Edwards Lifesciences Corp (NYSE:EW), and Synchrony Financial (NYSE:SYF) to gather more data points.
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At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.
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How have hedgies been trading State Street Corp (NYSE:STT)?
At the end of the third quarter, a total of 31 of the hedge funds tracked by Insider Monkey held long positions in this stock, a 6% drop from the previous quarter, though hedge fund positions remain well above their levels from quarters prior to Q2. With the smart money’s capital changing hands, there exists a few key hedge fund managers who were increasing their stakes significantly (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Pzena Investment Management, managed by Richard S. Pzena, holds the number one position in State Street Corp (NYSE:STT). Pzena Investment Management has a $206.3 million position in the stock, comprising 1.3% of its 13F portfolio. Sitting at the No. 2 spot is Yacktman Asset Management, managed by Donald Yacktman, which holds a $117.6 million position; 1% of its 13F portfolio is allocated to the company. Some other peers that are bullish include Mario Gabelli’s GAMCO Investors, Phill Gross and Robert Atchinson’s Adage Capital Management, and Israel Englander’s Millennium Management.
Because State Street Corp (NYSE:STT) has witnessed a decline in interest from the smart money, it’s safe to say that there were a few hedgies that slashed their entire stakes in the third quarter. At the top of the heap, David E. Shaw’s D E Shaw sold off the biggest stake of the “upper crust” of funds monitored by Insider Monkey, totaling an estimated $14.4 million in stock, and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital was right behind this move, as the fund said goodbye to about $14.4 million worth of STT shares. These moves are interesting, as aggregate hedge fund interest was cut by 2 funds in the third quarter.
Let’s now review hedge fund activity in other stocks similar to State Street Corp (NYSE:STT). We will take a look at Vertex Pharmaceuticals Incorporated (NASDAQ:VRTX), Edwards Lifesciences Corp (NYSE:EW), Synchrony Financial (NYSE:SYF), and Apache Corporation (NYSE:APA). This group of stocks’ market values are similar to STT’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| VRTX | 33 | 454491 | 0 |
| EW | 38 | 2001027 | -5 |
| SYF | 48 | 4023745 | -12 |
| APA | 33 | 1302418 | 0 |
As you can see these stocks had an average of 38 hedge funds with bullish positions and the average amount invested in these stocks was $1.94 billion. That figure was $634 million in STT’s case. Synchrony Financial (NYSE:SYF) is the most popular stock in this table. On the other hand Vertex Pharmaceuticals Incorporated (NASDAQ:VRTX) is the least popular one with only 33 bullish hedge fund positions. Compared to these stocks State Street Corp (NYSE:STT) is even less popular than VRTX and APA. Considering that hedge funds aren’t fond of this stock in relation to other companies analyzed in this article, it may be a good idea to analyze it in detail and understand why the smart money isn’t behind this stock. This isn’t necessarily bad news. Although it is possible that hedge funds may think the stock is overpriced and view the stock as a short candidate, they may not be very familiar with the bullish thesis. In either case more research is warranted.
Disclosure: None
