We are still in an overall bull market and many stocks that smart money investors were piling into surged in 2019. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained more than 57% each. Hedge funds’ top 3 stock picks returned 44.6% this year and beat the S&P 500 ETFs by almost 14 percentage points. That’s a big deal. This is why following the smart money sentiment is a useful tool at identifying the next stock to invest in.
Sealed Air Corporation (NYSE:SEE) was in 32 hedge funds’ portfolios at the end of September. SEE investors should pay attention to an increase in enthusiasm from smart money lately. There were 27 hedge funds in our database with SEE positions at the end of the previous quarter. Our calculations also showed that SEE isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video at the end of this article for Q2 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. 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 Russell 2000 ETFs by 40 percentage points since May 2014 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
Michael Lowenstein of Kensico Capital
We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We even check out this option genius’ weekly trade ideas. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager’s investor letter and the stock already gained 20 percent. With all of this in mind we’re going to go over the recent hedge fund action regarding Sealed Air Corporation (NYSE:SEE).
How have hedgies been trading Sealed Air Corporation (NYSE:SEE)?
At Q3’s end, a total of 32 of the hedge funds tracked by Insider Monkey were long this stock, a change of 19% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards SEE over the last 17 quarters. With the smart money’s positions undergoing their usual ebb and flow, there exists a few noteworthy hedge fund managers who were increasing their stakes meaningfully (or already accumulated large positions).
More specifically, Kensico Capital was the largest shareholder of Sealed Air Corporation (NYSE:SEE), with a stake worth $255.5 million reported as of the end of September. Trailing Kensico Capital was Rivulet Capital, which amassed a stake valued at $178 million. Nitorum Capital, Impax Asset Management, and Renaissance Technologies 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 20.19% of its 13F portfolio. Nitorum Capital is also relatively very bullish on the stock, designating 6.72 percent of its 13F equity portfolio to SEE.
Consequently, key hedge funds have jumped into Sealed Air Corporation (NYSE:SEE) headfirst. Citadel Investment Group, managed by Ken Griffin, initiated the most outsized position in Sealed Air Corporation (NYSE:SEE). Citadel Investment Group had $26.1 million invested in the company at the end of the quarter. Phill Gross and Robert Atchinson’s Adage Capital Management also made a $7.8 million investment in the stock during the quarter. The following funds were also among the new SEE investors: Paul Tudor Jones’s Tudor Investment Corp, Jeffrey Talpins’s Element Capital Management, and Matthew Tewksbury’s Stevens Capital Management.
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. We will take a look at Haemonetics Corporation (NYSE:HAE), Entegris Inc (NASDAQ:ENTG), Pentair plc (NYSE:PNR), and Buckeye Partners, L.P. (NYSE:BPL). All of these stocks’ market caps are similar to SEE’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| HAE | 21 | 601291 | -2 |
| ENTG | 26 | 807428 | 2 |
| PNR | 22 | 415842 | 1 |
| BPL | 18 | 536490 | 5 |
| Average | 21.75 | 590263 | 1.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 21.75 hedge funds with bullish positions and the average amount invested in these stocks was $590 million. That figure was $951 million in SEE’s case. Entegris Inc (NASDAQ:ENTG) is the most popular stock in this table. On the other hand Buckeye Partners, L.P. (NYSE:BPL) is the least popular one with only 18 bullish hedge fund positions. Compared to these stocks Sealed Air Corporation (NYSE:SEE) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.1% in 2019 through December 23rd and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. Unfortunately SEE wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on SEE were disappointed as the stock returned 17.9% so far in 2019 (through 12/23) and trailed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as 65 percent of these stocks already outperformed the market in 2019.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
