Is Steel Dynamics, Inc. (STLD) A Good Stock To Buy?

It was a rough third quarter for many hedge funds, which were naturally unable to overcome the big dip in the broad market, as the S&P 500 fell by about 7% during the quarter. The Russell 2000, composed of smaller companies, performed even worse, trailing the S&P by about 14 percentage points between June 25 and October 30, as investors fled less-known quantities for safe havens. This was the case with hedge funds, who we heard were pulling money from the market amid the volatility, which included money from small-cap stocks, which they invest in at a higher rate than other investors. This action contributed to the greater decline in these stocks during the tumultuous period. We will study how this market volatility affected their sentiment towards Steel Dynamics, Inc. (NASDAQ:STLD) during the quarter below.

Steel Dynamics, Inc. (NASDAQ:STLD) investors should be aware of a decrease in enthusiasm from smart money recently. 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 SolarCity Corp (NASDAQ:SCTY), GoPro Inc (NASDAQ:GPRO), and AECOM (NYSE:ACM) to gather more data points.

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Now, we’re going to go over the key action surrounding Steel Dynamics, Inc. (NASDAQ:STLD).

How have hedgies been trading Steel Dynamics, Inc. (NASDAQ:STLD)?

Heading into Q4, a total of 24 of the hedge funds tracked by Insider Monkey held long positions in this stock, a decline of 20% from one quarter earlier. With hedge funds’ positions undergoing their usual ebb and flow, there exists an “upper tier” of notable hedge fund managers who were boosting their stakes significantly (or already accumulated large positions).

According to Insider Monkey’s hedge fund database, Balyasny Asset Management, managed by Dmitry Balyasny, holds the largest position in Steel Dynamics, Inc. (NASDAQ:STLD). Balyasny Asset Management has a $90.7 million position in the stock, comprising 0.7% of its 13F portfolio. On Balyasny Asset Management’s heels is Legg Mason Capital Management, holding an $82.1 million position; 1.7% of its 13F portfolio is allocated to the stock. Remaining peers that hold long positions include Ken Griffin’s Citadel Investment Group, Cliff Asness’ AQR Capital Management, and Jonathan Barrett and Paul Segal’s Luminus Management.

Since Steel Dynamics, Inc. (NASDAQ:STLD) has experienced a declining sentiment from the aggregate hedge fund industry, it’s safe to say that there is a sect of hedge funds who were dropping their entire stakes by the end of the third quarter. It’s worth mentioning that Bruce J. Richards and Louis Hanover’s Marathon Asset Management said goodbye to the largest position of all the hedgies watched by Insider Monkey, valued at an estimated $16.1 million in stock, and Jacob Gottlieb’s Visium Asset Management was right behind this move, as the fund dumped about $15.9 million worth of shares. These transactions are important to note, as aggregate hedge fund interest fell by 6 funds by the end of the third quarter.

Let’s now review hedge fund activity in other stocks similar to Steel Dynamics, Inc. (NASDAQ:STLD). We will take a look at SolarCity Corp (NASDAQ:SCTY), GoPro Inc (NASDAQ:GPRO), AECOM (NYSE:ACM), and AptarGroup, Inc. (NYSE:ATR). This group of stocks’ market valuations is similar to Steel Dynamics, Inc. (NASDAQ:STLD)’s market valuation.

As you can see, these stocks had an average of 24 hedge funds with bullish positions and the average amount invested in these stocks was $415 million. That figure was $648 million in Steel Dynamics, Inc. (NASDAQ:STLD)’s case. SolarCity Corp (NASDAQ:SCTY) is the most popular stock in this table. On the other hand, AptarGroup, Inc. (NYSE:ATR) is the least popular one with only 18 bullish hedge fund positions. Steel Dynamics, Inc. (NASDAQ:STLD) 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. In this regard, SolarCity Corp (NASDAQ:SCTY) might be a better candidate to consider a long position.