“Since 2006, value stocks (IVE vs IVW) have underperformed 11 of the 13 calendar years and when they beat growth, it wasn’t by much. Cumulatively, through this week, it has been a 122% differential (up 52% for value vs up 174% for growth). This appears to be the longest and most severe drought for value investors since data collection began. It will go our way eventually as there are too many people paying far too much for today’s darlings, both public and private. Further, the ten-year yield of 2.5% (pre-tax) isn’t attractive nor is real estate. We believe the value part of the global equity market is the only place to earn solid risk adjusted returns and we believe those returns will be higher than normal,” said Vilas Fund in its Q1 investor letter. We aren’t sure whether value stocks outperform growth, but we follow hedge fund investor letters to understand where the markets and stocks might be going. This article will lay out and discuss the hedge fund and institutional investor sentiment towards Stericycle Inc (NASDAQ:SRCL).
Stericycle Inc (NASDAQ:SRCL) shares haven’t seen a lot of action during the third quarter. Overall, hedge fund sentiment was unchanged. The stock was in 16 hedge funds’ portfolios at the end of September. 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 Radian Group Inc (NYSE:RDN), ViaSat, Inc. (NASDAQ:VSAT), and Foot Locker, Inc. (NYSE:FL) to gather more data points. Our calculations also showed that SRCL 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.
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’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 27.8% through November 21, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
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. We’re going to check out the new hedge fund action regarding Stericycle Inc (NASDAQ:SRCL).
What does smart money think about Stericycle Inc (NASDAQ:SRCL)?
At the end of the third quarter, a total of 16 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from the second quarter of 2019. Below, you can check out the change in hedge fund sentiment towards SRCL over the last 17 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Ariel Investments held the most valuable stake in Stericycle Inc (NASDAQ:SRCL), which was worth $167.5 million at the end of the third quarter. On the second spot was Generation Investment Management which amassed $152.2 million worth of shares. Iridian Asset Management, Diamond Hill Capital, and Polar Capital 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 Dorset Management allocated the biggest weight to Stericycle Inc (NASDAQ:SRCL), around 6.72% of its 13F portfolio. Archon Capital Management is also relatively very bullish on the stock, setting aside 6.34 percent of its 13F equity portfolio to SRCL.
Judging by the fact that Stericycle Inc (NASDAQ:SRCL) has experienced bearish sentiment from hedge fund managers, logic holds that there were a few hedge funds that slashed their full holdings heading into Q4. It’s worth mentioning that Anand More’s SAYA Management dumped the biggest position of the “upper crust” of funds followed by Insider Monkey, worth about $10.1 million in stock. Noam Gottesman’s fund, GLG Partners, also sold off its stock, about $2.4 million worth. These transactions are important to note, as total 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 similar to Stericycle Inc (NASDAQ:SRCL). These stocks are Radian Group Inc (NYSE:RDN), ViaSat, Inc. (NASDAQ:VSAT), Foot Locker, Inc. (NYSE:FL), and Avnet, Inc. (NYSE:AVT). This group of stocks’ market caps are closest to SRCL’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| RDN | 22 | 178364 | 0 |
| VSAT | 27 | 1901555 | -1 |
| FL | 32 | 546398 | 0 |
| AVT | 28 | 678095 | 1 |
| Average | 27.25 | 826103 | 0 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 27.25 hedge funds with bullish positions and the average amount invested in these stocks was $826 million. That figure was $700 million in SRCL’s case. Foot Locker, Inc. (NYSE:FL) is the most popular stock in this table. On the other hand Radian Group Inc (NYSE:RDN) is the least popular one with only 22 bullish hedge fund positions. Compared to these stocks Stericycle Inc (NASDAQ:SRCL) is even less popular than RDN. Hedge funds clearly dropped the ball on SRCL as the stock delivered strong returns, though hedge funds’ consensus picks still generated respectable returns. 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 SRCL as the stock returned 23.3% during the fourth quarter (through the end of November) and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.
