Is STLD Stock A Buy or Sell?

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We have processed the filings of the more than 887 world-class investment firms that we track and now have access to the collective wisdom contained in these filings, which are based on their December 31st holdings, data that is available nowhere else. Should you consider Steel Dynamics, Inc. (NASDAQ:STLD) for your portfolio? We’ll look to this invaluable collective wisdom for the answer.

Is STLD stock a buy? Money managers were taking a pessimistic view. The number of long hedge fund positions were trimmed by 1 lately. Steel Dynamics, Inc. (NASDAQ:STLD) was in 27 hedge funds’ portfolios at the end of the fourth quarter of 2020. The all time high for this statistic is 42. Our calculations also showed that STLD isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings).

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. Hedge funds have more than $3 trillion in assets under management, so you can’t expect their entire portfolios to beat the market by large margins. Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 124 percentage points since March 2017 (see the details here). So you can still find a lot of gems by following hedge funds’ moves today.

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, auto parts business is a recession resistant business, so we are taking a closer look at this discount auto parts stock that is growing at a 196% annualized rate. We go through lists like the 15 best micro-cap stocks to buy now to identify the next stock with 10x upside potential. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. With all of this in mind we’re going to review the fresh hedge fund action surrounding Steel Dynamics, Inc. (NASDAQ:STLD).

Do Hedge Funds Think STLD Is A Good Stock To Buy Now?

At fourth quarter’s end, a total of 27 of the hedge funds tracked by Insider Monkey were long this stock, a change of -4% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards STLD over the last 22 quarters. With hedge funds’ sentiment swirling, there exists a few noteworthy hedge fund managers who were upping their holdings significantly (or already accumulated large positions).

Among these funds, D E Shaw held the most valuable stake in Steel Dynamics, Inc. (NASDAQ:STLD), which was worth $145.2 million at the end of the fourth quarter. On the second spot was AQR Capital Management which amassed $72.8 million worth of shares. Renaissance Technologies, Platinum Asset Management, and Scopus Asset Management 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 Lodge Hill Capital allocated the biggest weight to Steel Dynamics, Inc. (NASDAQ:STLD), around 3.88% of its 13F portfolio. Bronson Point Partners is also relatively very bullish on the stock, earmarking 0.88 percent of its 13F equity portfolio to STLD.

Since Steel Dynamics, Inc. (NASDAQ:STLD) has faced a decline in interest from the smart money, logic holds that there exists a select few funds that elected to cut their full holdings in the fourth quarter. At the top of the heap, Jonathan Barrett and Paul Segal’s Luminus Management dumped the biggest position of the “upper crust” of funds watched by Insider Monkey, valued at an estimated $1.7 million in stock, and Brandon Haley’s Holocene Advisors was right behind this move, as the fund dumped about $1.5 million worth. These bearish behaviors are interesting, as total hedge fund interest dropped by 1 funds in the fourth quarter.

Let’s now take a look at hedge fund activity in other stocks similar to Steel Dynamics, Inc. (NASDAQ:STLD). We will take a look at Regency Centers Corp (NYSE:REG), AGCO Corporation (NYSE:AGCO), Acceleron Pharma Inc (NASDAQ:XLRN), Commerce Bancshares, Inc. (NASDAQ:CBSH), OneConnect Financial Technology Co., Ltd. (NYSE:OCFT), Churchill Downs Incorporated (NASDAQ:CHDN), and Grupo Aval Acciones y Valores S.A. (NYSE:AVAL). This group of stocks’ market values match STLD’s market value.

View table here if you experience formatting issues.

As you can see these stocks had an average of 21.1 hedge funds with bullish positions and the average amount invested in these stocks was $382 million. That figure was $413 million in STLD’s case. AGCO Corporation (NYSE:AGCO) is the most popular stock in this table. On the other hand Grupo Aval Acciones y Valores S.A. (NYSE:AVAL) is the least popular one with only 4 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. Our overall hedge fund sentiment score for STLD is 55.2. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks gained 12.3% in 2021 through April 19th and still beat the market by 0.9 percentage points. Hedge funds were also right about betting on STLD as the stock returned 39.6% since the end of Q4 (through 4/19) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

Disclosure: None. This article was originally published at Insider Monkey.

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