Before we spend countless hours researching a company, we like to analyze what insiders, hedge funds and billionaire investors think of the stock first. This is a necessary first step in our investment process because our research has shown that the elite investors’ consensus returns have been exceptional. In the following paragraphs, we find out what the billionaire investors and hedge funds think of ServiceMaster Global Holdings Inc (NYSE:SERV).
ServiceMaster Global Holdings Inc (NYSE:SERV) investors should be aware of a decrease in support from the world’s most elite money managers lately. Our calculations also showed that SERV 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 21st century investor’s toolkit there are several tools market participants can use to appraise their stock investments. A pair of the less utilized tools are hedge fund and insider trading activity. We have shown that, historically, those who follow the top picks of the best hedge fund managers can trounce the S&P 500 by a healthy margin (see the details here).
Aaron Cowen of Suvretta Capital Management
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out trades like this one. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind we’re going to take a look at the new hedge fund action encompassing ServiceMaster Global Holdings Inc (NYSE:SERV).
Hedge fund activity in ServiceMaster Global Holdings Inc (NYSE:SERV)
At the end of the first quarter, a total of 31 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -26% from the fourth quarter of 2019. The graph below displays the number of hedge funds with bullish position in SERV over the last 18 quarters. With hedgies’ sentiment swirling, there exists a few notable hedge fund managers who were upping their holdings meaningfully (or already accumulated large positions).
The largest stake in ServiceMaster Global Holdings Inc (NYSE:SERV) was held by Iridian Asset Management, which reported holding $145.4 million worth of stock at the end of September. It was followed by Southpoint Capital Advisors with a $110.3 million position. Other investors bullish on the company included Gates Capital Management, Third Point, and Suvretta Capital Management. In terms of the portfolio weights assigned to each position Gates Capital Management allocated the biggest weight to ServiceMaster Global Holdings Inc (NYSE:SERV), around 5.85% of its 13F portfolio. Lionstone Capital Management is also relatively very bullish on the stock, designating 5.78 percent of its 13F equity portfolio to SERV.
Due to the fact that ServiceMaster Global Holdings Inc (NYSE:SERV) has witnessed falling interest from the smart money, it’s safe to say that there exists a select few hedge funds that slashed their positions entirely by the end of the first quarter. It’s worth mentioning that Robert Joseph Caruso’s Select Equity Group said goodbye to the largest investment of all the hedgies monitored by Insider Monkey, worth close to $343.3 million in stock, and Dmitry Balyasny’s Balyasny Asset Management was right behind this move, as the fund dropped about $21 million worth. These bearish behaviors are important to note, as total hedge fund interest was cut by 11 funds by the end of the first quarter.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as ServiceMaster Global Holdings Inc (NYSE:SERV) but similarly valued. We will take a look at J2 Global Inc (NASDAQ:JCOM), Inphi Corporation (NYSE:IPHI), Under Armour Inc (NYSE:UA), and Primerica, Inc. (NYSE:PRI). This group of stocks’ market caps match SERV’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| JCOM | 21 | 219272 | -2 |
| IPHI | 36 | 482361 | 5 |
| UA | 37 | 660755 | 5 |
| PRI | 23 | 303962 | -5 |
| Average | 29.25 | 416588 | 0.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 29.25 hedge funds with bullish positions and the average amount invested in these stocks was $417 million. That figure was $594 million in SERV’s case. Under Armour Inc (NYSE:UA) is the most popular stock in this table. On the other hand J2 Global Inc (NASDAQ:JCOM) is the least popular one with only 21 bullish hedge fund positions. ServiceMaster Global Holdings Inc (NYSE:SERV) is not the most popular stock in this group but hedge fund interest is still above average. 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 8.3% in 2020 through the end of May but still beat the market by 13.2 percentage points. Hedge funds were also right about betting on SERV as the stock returned 21.9% in Q2 (through the end of May) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
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Disclosure: None. This article was originally published at Insider Monkey.
