In this article we will check out the progression of hedge fund sentiment towards Stewart Information Services Corp (NYSE:STC) and determine whether it is a good investment right now. We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also employ numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.
Stewart Information Services Corp (NYSE:STC) investors should be aware of a decrease in enthusiasm from smart money lately. Our calculations also showed that STC 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.
In the eyes of most traders, hedge funds are assumed to be slow, outdated financial vehicles of the past. While there are more than 8000 funds in operation at present, Our researchers look at the leaders of this club, around 850 funds. Most estimates calculate that this group of people preside over the lion’s share of the hedge fund industry’s total asset base, and by tracking their unrivaled picks, Insider Monkey has revealed a few investment strategies that have historically exceeded the market. Insider Monkey’s flagship short hedge fund strategy beat the S&P 500 short ETFs by around 20 percentage points per year since its inception in March 2017. Our portfolio of short stocks lost 36% since February 2017 (through May 18th) even though the market was up 30% during the same period. We just shared a list of 8 short targets in our latest quarterly update .
Martin Whitman of Third Avenue Management
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, blockchain technology’s influence will go beyond online payments. So, we are checking out this futurist’s moonshot opportunities in tech stocks. We interview hedge fund managers and ask them about their best ideas. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. For example we are checking out stocks recommended/scorned by legendary Bill Miller. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. Now let’s analyze the key hedge fund action surrounding Stewart Information Services Corp (NYSE:STC).
How are hedge funds trading Stewart Information Services Corp (NYSE:STC)?
Heading into the second quarter of 2020, a total of 14 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -7% from one quarter earlier. On the other hand, there were a total of 17 hedge funds with a bullish position in STC a year ago. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Renaissance Technologies held the most valuable stake in Stewart Information Services Corp (NYSE:STC), which was worth $30.3 million at the end of the third quarter. On the second spot was Royce & Associates which amassed $9.2 million worth of shares. AQR Capital Management, Millennium Management, and Two Sigma Advisors 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 AltraVue Capital allocated the biggest weight to Stewart Information Services Corp (NYSE:STC), around 0.29% of its 13F portfolio. Royce & Associates is also relatively very bullish on the stock, setting aside 0.13 percent of its 13F equity portfolio to STC.
Due to the fact that Stewart Information Services Corp (NYSE:STC) has witnessed a decline in interest from the aggregate hedge fund industry, it’s safe to say that there is a sect of funds who were dropping their entire stakes heading into Q4. At the top of the heap, Peter Algert and Kevin Coldiron’s Algert Coldiron Investors dropped the largest position of the “upper crust” of funds followed by Insider Monkey, worth about $0.4 million in stock. D. E. Shaw’s fund, D E Shaw, also sold off its stock, about $0.4 million worth. These transactions are intriguing to say the least, as total hedge fund interest was cut by 1 funds heading into Q4.
Let’s go over hedge fund activity in other stocks similar to Stewart Information Services Corp (NYSE:STC). We will take a look at Johnson Outdoors Inc. (NASDAQ:JOUT), Athenex, Inc. (NASDAQ:ATNX), Eventbrite, Inc. (NYSE:EB), and Triumph Bancorp Inc (NASDAQ:TBK). This group of stocks’ market values are closest to STC’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| JOUT | 8 | 61506 | -6 |
| ATNX | 15 | 196800 | 0 |
| EB | 25 | 134133 | 1 |
| TBK | 6 | 24013 | -1 |
| Average | 13.5 | 104113 | -1.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 13.5 hedge funds with bullish positions and the average amount invested in these stocks was $104 million. That figure was $57 million in STC’s case. Eventbrite, Inc. (NYSE:EB) is the most popular stock in this table. On the other hand Triumph Bancorp Inc (NASDAQ:TBK) is the least popular one with only 6 bullish hedge fund positions. Stewart Information Services Corp (NYSE:STC) 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 13.3% in 2020 through June 25th but beat the market by 16.8 percentage points. Unfortunately STC wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on STC were disappointed as the stock returned 19.7% 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.
