In this article we will take a look at whether hedge funds think State Street Corporation (NYSE:STT) is a good investment right now. We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, unconventional data sources, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.
State Street Corporation (NYSE:STT) was in 34 hedge funds’ portfolios at the end of the first quarter of 2020. STT investors should pay attention to a decrease in hedge fund interest of late. There were 45 hedge funds in our database with STT positions at the end of the previous quarter. Our calculations also showed that STT isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).
Video: Watch our video about the top 5 most popular hedge fund stocks.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 51 percentage points since March 2017 (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 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Mario Gabelli of GAMCO Investors
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out trades like this one. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind let’s go over the new hedge fund action surrounding State Street Corporation (NYSE:STT).
How are hedge funds trading State Street Corporation (NYSE:STT)?
At Q1’s end, a total of 34 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -24% from the previous quarter. The graph below displays the number of hedge funds with bullish position in STT over the last 18 quarters. With hedgies’ sentiment swirling, there exists a few key hedge fund managers who were upping their stakes considerably (or already accumulated large positions).
More specifically, Yacktman Asset Management was the largest shareholder of State Street Corporation (NYSE:STT), with a stake worth $193.4 million reported as of the end of September. Trailing Yacktman Asset Management was GAMCO Investors, which amassed a stake valued at $63.6 million. Two Sigma Advisors, AQR Capital Management, and Renaissance Technologies 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 Yacktman Asset Management allocated the biggest weight to State Street Corporation (NYSE:STT), around 3.21% of its 13F portfolio. Gillson Capital is also relatively very bullish on the stock, setting aside 2.34 percent of its 13F equity portfolio to STT.
Judging by the fact that State Street Corporation (NYSE:STT) has witnessed declining sentiment from hedge fund managers, it’s safe to say that there was a specific group of fund managers who were dropping their full holdings heading into Q4. Interestingly, Anand Parekh’s Alyeska Investment Group dropped the biggest stake of the 750 funds monitored by Insider Monkey, worth an estimated $61.5 million in stock, and Louis Bacon’s Moore Global Investments was right behind this move, as the fund dumped about $49.4 million worth. These moves are important to note, as aggregate hedge fund interest fell by 11 funds heading into Q4.
Let’s now review hedge fund activity in other stocks similar to State Street Corporation (NYSE:STT). These stocks are Sun Life Financial Inc. (NYSE:SLF), Franco-Nevada Corporation (NYSE:FNV), Welltower Inc. (NYSE:WELL), and TD Ameritrade Holding Corp. (NYSE:AMTD). This group of stocks’ market caps are similar to STT’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| SLF | 16 | 102769 | 0 |
| FNV | 21 | 896434 | -3 |
| WELL | 25 | 313164 | 1 |
| AMTD | 46 | 1250217 | -4 |
| Average | 27 | 640646 | -1.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 27 hedge funds with bullish positions and the average amount invested in these stocks was $641 million. That figure was $503 million in STT’s case. TD Ameritrade Holding Corp. (NYSE:AMTD) is the most popular stock in this table. On the other hand Sun Life Financial Inc. (NYSE:SLF) is the least popular one with only 16 bullish hedge fund positions. State Street Corporation (NYSE:STT) 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. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 8.3% in 2020 through the end of May but beat the market by 13.2 percentage points. Unfortunately STT wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on STT were disappointed as the stock returned 14.4% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
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Disclosure: None. This article was originally published at Insider Monkey.
