Sealed Air Corporation (SEE): Hedge Funds Are Cautious

We know that hedge funds generate strong, risk-adjusted returns over the long run, which is why imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, professional investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do. However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, let’s examine the smart money sentiment towards Sealed Air Corporation (NYSE:SEE) and determine whether hedge funds skillfully traded this stock.

Is Sealed Air Corporation (NYSE:SEE) a healthy stock for your portfolio? Hedge funds were turning less bullish. The number of long hedge fund bets fell by 1 lately. Sealed Air Corporation (NYSE:SEE) was in 28 hedge funds’ portfolios at the end of the second quarter of 2020. The all time high for this statistics is 49. Our calculations also showed that SEE isn’t among the 30 most popular stocks among hedge funds (click for Q2 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.

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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 56 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 34% through August 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Ricky Sandler of Eminence Capital

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, legal marijuana is one of the fastest growing industries right now, so we are checking out stock pitches like “the Starbucks of cannabis” to identify the next tenbagger. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. 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 to get excerpts of these letters in your inbox. Keeping this in mind let’s view the key hedge fund action surrounding Sealed Air Corporation (NYSE:SEE).

How have hedgies been trading Sealed Air Corporation (NYSE:SEE)?

At Q2’s end, a total of 28 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -3% from the first quarter of 2020. Below, you can check out the change in hedge fund sentiment towards SEE over the last 20 quarters. With the smart money’s capital changing hands, there exists a few notable hedge fund managers who were increasing their stakes substantially (or already accumulated large positions).

Among these funds, Rivulet Capital held the most valuable stake in Sealed Air Corporation (NYSE:SEE), which was worth $258.8 million at the end of the third quarter. On the second spot was Kensico Capital which amassed $177.4 million worth of shares. Eminence Capital, Nitorum Capital, and D E Shaw 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 Rivulet Capital allocated the biggest weight to Sealed Air Corporation (NYSE:SEE), around 16.86% of its 13F portfolio. One Fin Capital Management is also relatively very bullish on the stock, dishing out 5.52 percent of its 13F equity portfolio to SEE.

Since Sealed Air Corporation (NYSE:SEE) has witnessed a decline in interest from the aggregate hedge fund industry, we can see that there were a few money managers that decided to sell off their full holdings last quarter. Interestingly, Paul Marshall and Ian Wace’s Marshall Wace LLP sold off the largest position of the “upper crust” of funds tracked by Insider Monkey, valued at about $2.1 million in stock. Qing Li’s fund, Sciencast Management, also sold off its stock, about $0.8 million worth. These transactions are interesting, as aggregate hedge fund interest was cut by 1 funds last quarter.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Sealed Air Corporation (NYSE:SEE) but similarly valued. These stocks are Flex Ltd. (NASDAQ:FLEX), Apache Corporation (NYSE:APA), Hyatt Hotels Corporation (NYSE:H), Rexford Industrial Realty Inc (NYSE:REXR), ITT Inc. (NYSE:ITT), Brunswick Corporation (NYSE:BC), and National Instruments Corporation (NASDAQ:NATI). This group of stocks’ market valuations resemble SEE’s market valuation.

View table here if you experience formatting issues.

As you can see these stocks had an average of 31.4 hedge funds with bullish positions and the average amount invested in these stocks was $625 million. That figure was $812 million in SEE’s case. Apache Corporation (NYSE:APA) is the most popular stock in this table. On the other hand Rexford Industrial Realty Inc (NYSE:REXR) is the least popular one with only 24 bullish hedge fund positions. Sealed Air Corporation (NYSE:SEE) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for SEE is 33.6. 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 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 21.3% in 2020 through September 25th and still beat the market by 17.7 percentage points. A small number of hedge funds were also right about betting on SEE as the stock returned 15.7% since the end of June (through September 25th) and outperformed the market by an even larger margin.

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