There are several ways to beat the market, and investing in small cap stocks has historically been one of them. We like to improve the odds of beating the market further by examining what famous hedge fund operators such as Jeff Ubben, George Soros and Carl Icahn think. Those hedge fund operators make billions of dollars each year by hiring the best and the brightest to do research on stocks, including small cap stocks that big brokerage houses simply don’t cover. Because of Carl Icahn and other elite funds’ exemplary historical records, we pay attention to their small cap picks. In this article, we use hedge fund filing data to analyze SiteOne Landscape Supply, Inc. (NYSE:SITE).
SiteOne Landscape Supply, Inc. (NYSE:SITE) shares haven’t seen a lot of action during the second quarter. Overall, hedge fund sentiment was unchanged. The stock was in 12 hedge funds’ portfolios at the end of the second quarter of 2019. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as TC Pipelines, LP (NYSE:TCP), Cimpress NV (NASDAQ:CMPR), and Brooks Automation, Inc. (NASDAQ:BRKS) to gather more data points. Our calculations also showed that SITE isn’t among the 30 most popular stocks among hedge funds (see the video below).
Video: Click the image to 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 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 market by 40 percentage points since May 2014 through May 30, 2019 (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.
Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. We’re going to analyze the recent hedge fund action surrounding SiteOne Landscape Supply, Inc. (NYSE:SITE).
Hedge fund activity in SiteOne Landscape Supply, Inc. (NYSE:SITE)
Heading into the third quarter of 2019, a total of 12 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from the first quarter of 2019. Below, you can check out the change in hedge fund sentiment towards SITE over the last 16 quarters. With the smart money’s positions undergoing their usual ebb and flow, there exists an “upper tier” of noteworthy hedge fund managers who were upping their holdings significantly (or already accumulated large positions).
More specifically, Greenhouse Funds was the largest shareholder of SiteOne Landscape Supply, Inc. (NYSE:SITE), with a stake worth $18.6 million reported as of the end of March. Trailing Greenhouse Funds was Carlson Capital, which amassed a stake valued at $8 million. Lionstone Capital Management, Citadel Investment Group, and Royce & Associates were also very fond of the stock, giving the stock large weights in their portfolios.
Judging by the fact that SiteOne Landscape Supply, Inc. (NYSE:SITE) has experienced a decline in interest from the smart money, it’s easy to see that there were a few money managers who were dropping their positions entirely heading into Q3. Interestingly, Noam Gottesman’s GLG Partners dropped the largest investment of all the hedgies watched by Insider Monkey, worth close to $3.3 million in stock, and Curtis Schenker and Craig Effron’s Scoggin was right behind this move, as the fund dropped about $2.6 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as SiteOne Landscape Supply, Inc. (NYSE:SITE) but similarly valued. We will take a look at TC Pipelines, LP (NYSE:TCP), Cimpress NV (NASDAQ:CMPR), Brooks Automation, Inc. (NASDAQ:BRKS), and Valmont Industries, Inc. (NYSE:VMI). This group of stocks’ market values resemble SITE’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| TCP | 5 | 18940 | 0 |
| CMPR | 12 | 495773 | 1 |
| BRKS | 13 | 108740 | 4 |
| VMI | 25 | 294997 | 6 |
| Average | 13.75 | 229613 | 2.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 13.75 hedge funds with bullish positions and the average amount invested in these stocks was $230 million. That figure was $40 million in SITE’s case. Valmont Industries, Inc. (NYSE:VMI) is the most popular stock in this table. On the other hand TC Pipelines, LP (NYSE:TCP) is the least popular one with only 5 bullish hedge fund positions. SiteOne Landscape Supply, Inc. (NYSE:SITE) 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 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. A small number of hedge funds were also right about betting on SITE as the stock returned 6.8% during the same time frame and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.
