The Russell 2000 ETF (IWM) has shot up by 38% since hitting a 52-week low on February 11, easily outdistancing the S&P 500 ETF (SPY)’s 19% gains during that time. Nor is the small-cap rally likely to be over. History shows that after periods of 15% or greater declines in the Russell 2000 ETF, it has responded with average gains of nearly 100%. In fact, only once did the rebound run come in below 60% gains. It’s no wonder then that hedge funds appear to be aggressively putting their money back into small-cap stocks. In this article, we’ll look at their Q3 trading habits in regards to STERIS Plc (NYSE:STE).
STERIS Plc (NYSE:STE) witnessed a decrease in activity from the world’s largest hedge funds recently. There were 22 hedge funds in our database with STE positions at the end of September. However, 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 Black Knight Financial Services Inc (NYSE:BKFS), Flowserve Corporation (NYSE:FLS), and Jacobs Engineering Group Inc (NYSE:JEC) to gather more data points.
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Follow Steris Corp (NYSE:STE)
We care about hedge fund sentiment because historically hedge funds’ stock picks delivered strong risk adjusted returns. There are certain segments of the market where hedge funds’ stock picks performed much better than its benchmarks. For instance, the 30 most popular mid-cap stocks among the best performing hedge funds returned 18% over the last 12 months outpacing S&P 500 Index by more than 10 percentage points. We developed this strategy 2.5 years ago and started sharing its picks in our quarterly newsletter. It bested the S&P 500 Index ETFs by delivering a solid 39% vs. 22% gain for its benchmarks.
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Keeping this in mind, we’re going to take a peek at the key action regarding STERIS Plc (NYSE:STE).
What have hedge funds been doing with STERIS Plc (NYSE:STE)?
Heading into the fourth quarter of 2016, a total of 22 of the hedge funds tracked by Insider Monkey held long positions in this stock, which represents a decline of 27% from the second quarter of 2016. On the other hand, there were a total of 24 hedge funds with a bullish position in STE at the beginning of this year. With hedgies’ positions undergoing their usual ebb and flow, there exists an “upper tier” of key hedge fund managers who were boosting their stakes substantially (or already accumulated large positions).
According to Insider Monkey’s hedge fund database, David Cohen and Harold Levy’s Iridian Asset Management has the number one position in STERIS Plc (NYSE:STE), worth close to $305.2 million, corresponding to 2.7% of its total 13F portfolio. On Iridian Asset Management’s heels is Fisher Asset Management, led by Ken Fisher, which holds a $119.8 million position; 0.2% of its 13F portfolio is allocated to the stock. Remaining peers that hold long positions consist of Ken Griffin’s Citadel Investment Group, John Paulson’s Paulson & Co and Renaissance Technologies, one of the largest hedge funds in the world. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.
Since STERIS Plc (NYSE:STE) has experienced bearish sentiment from the smart money, logic holds that there is a sect of funds who sold off their entire stakes by the end of the third quarter. Intriguingly, Chuck Royce’s Royce & Associates dropped the largest position of all the hedgies followed by Insider Monkey, valued at close to $25.4 million in stock, and Benjamin A. Smith’s Laurion Capital Management was right behind this move, as the fund cut about $16.9 million worth of shares.
Let’s now take a look at hedge fund activity in other stocks similar to STERIS Plc (NYSE:STE). We will take a look at Black Knight Financial Services Inc (NYSE:BKFS), Flowserve Corporation (NYSE:FLS), Jacobs Engineering Group Inc (NYSE:JEC), and Zillow Inc (NASDAQ:Z). This group of stocks’ market caps match STE’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| BKFS | 9 | 15797 | -2 |
| FLS | 26 | 402485 | -6 |
| JEC | 17 | 147916 | -1 |
| Z | 26 | 614342 | 0 |
As you can see these stocks had an average of 20 funds with bullish positions and the average amount invested in these stocks was $295 million. That figure was $629 million in STE’s case. Flowserve Corporation (NYSE:FLS) is the most popular stock in this table. On the other hand Black Knight Financial Services Inc (NYSE:BKFS) is the least popular one with only nine 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 Flowserve Corporation (NYSE:FLS) might be a better candidate to consider taking a long position in.
Disclosure: none
