Although the masses and most of the financial media blame hedge funds for their exorbitant fee structure and disappointing performance, these investors have proved to have great stock picking abilities over the years (that’s why their assets under management continue to swell). We believe hedge fund sentiment should serve as a crucial tool of an individual investor’s stock selection process, as it may offer great insights of how the brightest minds of the finance industry feel about specific stocks. After all, these people have access to smartest analysts and expensive data/information sources that individual investors can’t match. So should one consider investing in Steris Plc (NYSE:STE)? The smart money sentiment can provide an answer to this question.
Steris Plc (NYSE:STE) shares haven’t seen a lot of action during the third quarter. Overall, hedge fund sentiment was unchanged. The stock was in 21 hedge funds’ portfolios at the end of September. At the end of this article we will also compare STE to other stocks including Qorvo Inc (NASDAQ:QRVO), UGI Corp (NYSE:UGI), and iShares Nasdaq Biotechnology ETF (NASDAQ:IBB) to get a better sense of its popularity.
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 market by 18 percentage points since May 2014 through December 3, 2018 (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 24% through December 3, 2018. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Let’s take a look at the fresh hedge fund action encompassing Steris Plc (NYSE:STE).
Hedge fund activity in Steris Plc (NYSE:STE)
At the end of the third quarter, a total of 21 of the hedge funds tracked by Insider Monkey held long positions in this stock, representing no change from the second quarter of 2018. By comparison, 20 hedge funds held shares or bullish call options in STE heading into this year. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Fisher Asset Management held the most valuable stake in Steris Plc (NYSE:STE), which was worth $160.7 million at the end of the third quarter. On the second spot was GLG Partners which amassed $24.7 million worth of shares. Moreover, Renaissance Technologies, Gotham Asset Management, and GAMCO Investors were also bullish on Steris Plc (NYSE:STE), allocating a large percentage of their portfolios to this stock.
Seeing as Steris Plc (NYSE:STE) has faced declining sentiment from the smart money, logic holds that there lies a certain “tier” of funds that decided to sell off their entire stakes last quarter. Intriguingly, Brian Ashford-Russell and Tim Woolley’s Polar Capital dumped the largest stake of all the hedgies monitored by Insider Monkey, valued at close to $25.2 million in stock. Peter Rathjens, Bruce Clarke and John Campbell’s fund, Arrowstreet Capital, also said goodbye to its stock, about $2.6 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s go over hedge fund activity in other stocks similar to Steris Plc (NYSE:STE). These stocks are Qorvo Inc (NASDAQ:QRVO), UGI Corp (NYSE:UGI), iShares Nasdaq Biotechnology ETF (NASDAQ:IBB), and Cognex Corporation (NASDAQ:CGNX). This group of stocks’ market valuations are similar to STE’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| QRVO | 28 | 1567995 | 4 |
| UGI | 19 | 495269 | 2 |
| IBB | 17 | 190644 | 0 |
| CGNX | 13 | 272086 | -3 |
| Average | 19.25 | 631499 | 0.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 19.25 hedge funds with bullish positions and the average amount invested in these stocks was $631 million. That figure was $269 million in STE’s case. Qorvo Inc (NASDAQ:QRVO) is the most popular stock in this table. On the other hand Cognex Corporation (NASDAQ:CGNX) is the least popular one with only 13 bullish hedge fund positions. Steris Plc (NYSE:STE) 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 QRVO might be a better candidate to consider a long position.
Disclosure: None. This article was originally published at Insider Monkey.
