Is STX Stock A Buy or Sell?

Hedge Funds and other institutional investors have just completed filing their 13Fs with the Securities and Exchange Commission, revealing their equity portfolios as of the end of September. At Insider Monkey, we follow nearly 900 active hedge funds and notable investors and by analyzing their 13F filings, we can determine the stocks that they are collectively bullish on. One of their picks is Seagate Technology plc (NASDAQ:STX), so let’s take a closer look at the sentiment that surrounds it in the current quarter.

Is STX stock a buy? Investors who are in the know were becoming more confident. The number of bullish hedge fund bets improved by 7 in recent months. Seagate Technology plc (NASDAQ:STX) was in 30 hedge funds’ portfolios at the end of December. The all time high for this statistic is 38. Our calculations also showed that STX isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings). There were 23 hedge funds in our database with STX positions at the end of the third quarter.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 124 percentage points since March 2017 (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 13% through November 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Jeffrey Ubben of ValueAct Capital

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, we heard that billionaire Peter Thiel is backing this psychedelic-drug startup. So, we are taking a closer look at this space. We go through lists like the 10 best biotech stocks under $10 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. Keeping this in mind we’re going to take a look at the recent hedge fund action encompassing Seagate Technology plc (NASDAQ:STX).

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

Heading into the first quarter of 2021, a total of 30 of the hedge funds tracked by Insider Monkey were long this stock, a change of 30% from the third quarter of 2020. By comparison, 35 hedge funds held shares or bullish call options in STX a year ago. 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, ValueAct Capital held the most valuable stake in Seagate Technology plc (NASDAQ:STX), which was worth $1873.9 million at the end of the fourth quarter. On the second spot was Millennium Management which amassed $51.9 million worth of shares. Arrowstreet Capital, Two Sigma Advisors, and Citadel Investment Group 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 ValueAct Capital allocated the biggest weight to Seagate Technology plc (NASDAQ:STX), around 21.74% of its 13F portfolio. 13D Management is also relatively very bullish on the stock, earmarking 3.38 percent of its 13F equity portfolio to STX.

As one would reasonably expect, key hedge funds were breaking ground themselves. Force Hill Capital Management, managed by Suraj Parkash Chopra, assembled the biggest position in Seagate Technology plc (NASDAQ:STX). Force Hill Capital Management had $12.6 million invested in the company at the end of the quarter. Paul Tudor Jones’s Tudor Investment Corp also made a $4.8 million investment in the stock during the quarter. The following funds were also among the new STX investors: Ryan Tolkin (CIO)’s Schonfeld Strategic Advisors, Mika Toikka’s AlphaCrest Capital Management, and Qing Li’s Sciencast Management.

Let’s also examine hedge fund activity in other stocks similar to Seagate Technology plc (NASDAQ:STX). These stocks are Tiffany & Co. (NYSE:TIF), Varian Medical Systems, Inc. (NYSE:VAR), BioMarin Pharmaceutical Inc. (NASDAQ:BMRN), SK Telecom Co., Ltd. (NYSE:SKM), GoodRx Holdings, Inc. (NASDAQ:GDRX), Korea Electric Power Corporation (NYSE:KEP), and Ceridian HCM Holding Inc. (NYSE:CDAY). This group of stocks’ market caps are similar to STX’s market cap.

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As you can see these stocks had an average of 31 hedge funds with bullish positions and the average amount invested in these stocks was $1239 million. That figure was $2167 million in STX’s case. BioMarin Pharmaceutical Inc. (NASDAQ:BMRN) is the most popular stock in this table. On the other hand SK Telecom Co., Ltd. (NYSE:SKM) is the least popular one with only 4 bullish hedge fund positions. Seagate Technology plc (NASDAQ:STX) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for STX is 61.3. 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 12.2% in 2021 through April 12th and still beat the market by 1.5 percentage points. A small number of hedge funds were also right about betting on STX as the stock returned 29.7% since the end of the fourth quarter (through 4/12) and outperformed the market by an even larger margin.

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

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