Many investors, including Paul Tudor Jones or Stan Druckenmiller, have been saying before last year’s Q4 market crash that the stock market is overvalued due to a low interest rate environment that leads to companies swapping their equity for debt and focusing mostly on short-term performance such as beating the quarterly earnings estimates. In the first half of 2019, most investors recovered all of their Q4 losses as sentiment shifted and optimism dominated the US China trade negotiations. Nevertheless, many of the stocks that delivered strong returns in the first half still sport strong fundamentals and their gains were more related to the general market sentiment rather than their individual performance and hedge funds kept their bullish stance. In this article we will find out how hedge fund sentiment to Schweitzer-Mauduit International, Inc. (NYSE:SWM) changed recently.
Is Schweitzer-Mauduit International, Inc. (NYSE:SWM) a first-rate investment today? The smart money is becoming less confident. The number of bullish hedge fund positions went down by 2 recently. Our calculations also showed that SWM isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
To the average investor there are dozens of metrics market participants use to evaluate their stock investments. A pair of the most underrated metrics are hedge fund and insider trading activity. We have shown that, historically, those who follow the best picks of the best investment managers can beat the broader indices by a very impressive amount (see the details here).
Jim Simons of Renaissance Technologies
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. 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 also rely on the best performing hedge funds‘ buy/sell signals. Let’s review the key hedge fund action regarding Schweitzer-Mauduit International, Inc. (NYSE:SWM).
What does smart money think about Schweitzer-Mauduit International, Inc. (NYSE:SWM)?
At Q3’s end, a total of 8 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -20% from the second quarter of 2019. On the other hand, there were a total of 14 hedge funds with a bullish position in SWM a year ago. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Renaissance Technologies was the largest shareholder of Schweitzer-Mauduit International, Inc. (NYSE:SWM), with a stake worth $21.7 million reported as of the end of September. Trailing Renaissance Technologies was Royce & Associates, which amassed a stake valued at $2.4 million. Two Sigma Advisors, Millennium Management, and Weld Capital 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 AlphaOne Capital Partners allocated the biggest weight to Schweitzer-Mauduit International, Inc. (NYSE:SWM), around 0.17% of its 13F portfolio. Weld Capital Management is also relatively very bullish on the stock, setting aside 0.16 percent of its 13F equity portfolio to SWM.
Because Schweitzer-Mauduit International, Inc. (NYSE:SWM) has faced bearish sentiment from the entirety of the hedge funds we track, logic holds that there was a specific group of fund managers that slashed their full holdings heading into Q4. At the top of the heap, Paul Tudor Jones’s Tudor Investment Corp said goodbye to the biggest position of all the hedgies monitored by Insider Monkey, comprising about $0.6 million in stock, and Thomas Bailard’s Bailard Inc was right behind this move, as the fund dropped about $0.4 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest dropped by 2 funds heading into Q4.
Let’s also examine hedge fund activity in other stocks similar to Schweitzer-Mauduit International, Inc. (NYSE:SWM). We will take a look at Stratasys, Ltd. (NASDAQ:SSYS), Veracyte Inc (NASDAQ:VCYT), Southside Bancshares, Inc. (NASDAQ:SBSI), and STAAR Surgical Company (NASDAQ:STAA). This group of stocks’ market valuations match SWM’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| SSYS | 13 | 108677 | -3 |
| VCYT | 18 | 102679 | -6 |
| SBSI | 7 | 56884 | 0 |
| STAA | 13 | 457044 | -3 |
| Average | 12.75 | 181321 | -3 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 12.75 hedge funds with bullish positions and the average amount invested in these stocks was $181 million. That figure was $28 million in SWM’s case. Veracyte Inc (NASDAQ:VCYT) is the most popular stock in this table. On the other hand Southside Bancshares, Inc. (NASDAQ:SBSI) is the least popular one with only 7 bullish hedge fund positions. Schweitzer-Mauduit International, Inc. (NYSE:SWM) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. A small number of hedge funds were also right about betting on SWM as the stock returned 19.5% during the first two months of Q4 and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.
