Does Stericycle Inc (NASDAQ:SRCL) represent a good buying opportunity at the moment? Let’s quickly check the hedge fund interest towards the company. Hedge fund firms constantly search out bright intellectuals and highly-experienced employees and throw away millions of dollars on satellite photos and other research activities, so it is no wonder why they tend to generate millions in profits each year. It is also true that some hedge fund players fail inconceivably on some occasions, but net net their stock picks have been generating superior risk-adjusted returns on average over the years.
Stericycle Inc (NASDAQ:SRCL) was in 22 hedge funds’ portfolios at the end of March. SRCL investors should be aware of an increase in hedge fund sentiment lately. There were 19 hedge funds in our database with SRCL positions at the end of the previous quarter. Our calculations also showed that SRCL isn’t among the 30 most popular stocks among hedge funds.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s flagship best performing hedge funds strategy returned 25.8% year to date (through May 30th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 40 percentage points since its inception (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
We’re going to view the key hedge fund action regarding Stericycle Inc (NASDAQ:SRCL).
What does the smart money think about Stericycle Inc (NASDAQ:SRCL)?
At the end of the first quarter, a total of 22 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 16% from the fourth quarter of 2018. Below, you can check out the change in hedge fund sentiment towards SRCL over the last 15 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Ariel Investments held the most valuable stake in Stericycle Inc (NASDAQ:SRCL), which was worth $186.8 million at the end of the first quarter. On the second spot was Generation Investment Management which amassed $139.1 million worth of shares. Moreover, Polar Capital, Diamond Hill Capital, and Markel Gayner Asset Management were also bullish on Stericycle Inc (NASDAQ:SRCL), allocating a large percentage of their portfolios to this stock.
Now, key money managers have been driving this bullishness. Generation Investment Management, managed by David Blood and Al Gore, initiated the most valuable position in Stericycle Inc (NASDAQ:SRCL). Generation Investment Management had $139.1 million invested in the company at the end of the quarter. Constantinos J. Christofilis’s Archon Capital Management also initiated a $14.1 million position during the quarter. The following funds were also among the new SRCL investors: David M. Knott’s Dorset Management, Steve Cohen’s Point72 Asset Management, and David Brown’s Hawk Ridge Management.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Stericycle Inc (NASDAQ:SRCL) but similarly valued. We will take a look at Zynga Inc (NASDAQ:ZNGA), Anaplan, Inc. (NYSE:PLAN), JetBlue Airways Corporation (NASDAQ:JBLU), and Janus Henderson Group plc (NYSE:JHG). This group of stocks’ market valuations are similar to SRCL’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| ZNGA | 35 | 799497 | 6 |
| PLAN | 22 | 625121 | 1 |
| JBLU | 26 | 498119 | -5 |
| JHG | 12 | 145597 | -3 |
| Average | 23.75 | 517084 | -0.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 23.75 hedge funds with bullish positions and the average amount invested in these stocks was $517 million. That figure was $561 million in SRCL’s case. Zynga Inc (NASDAQ:ZNGA) is the most popular stock in this table. On the other hand Janus Henderson Group plc (NYSE:JHG) is the least popular one with only 12 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. 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 20 most popular stocks among hedge funds returned 1.9% in Q2 through May 30th and outperformed the S&P 500 ETF (SPY) by more than 3 percentage points. Unfortunately SRCL wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); SRCL investors were disappointed as the stock returned -16.6% 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 20 most popular stocks among hedge funds as 13 of these stocks already outperformed the market so far in Q2.
Disclosure: None. This article was originally published at Insider Monkey.
