Stifel Financial Corp. (SF): Are Hedge Funds Right To Abandon This Stock?

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 Carl Icahn and George Soros 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 successful funds’ exemplary historical records, we pay attention to their small cap picks. In this article, we use hedge fund filing data to analyze Stifel Financial Corp. (NYSE:SF).

Stifel Financial Corp. (NYSE:SF) was in 11 hedge funds’ portfolios at the end of the third quarter of 2016. SF shareholders have witnessed a decrease in hedge fund interest lately. There were 13 hedge funds in our database with SF holdings at the end of the previous quarter. 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 PriceSmart, Inc. (NASDAQ:PSMT), InterOil Corporation (USA) (NYSE:IOC), and Kennedy-Wilson Holdings Inc (NYSE:KW) to gather more data points.

At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.

Andrey_Popov/Shutterstock.com

How are hedge funds trading Stifel Financial Corp. (NYSE:SF)?

Heading into the fourth quarter of 2016, a total of 11 of the hedge funds tracked by Insider Monkey were bullish on this stock, a 15% drop from one quarter earlier, and the fourth-straight quarter with a decline. Below, you can check out the change in hedge fund sentiment towards SF over the last 5 quarters. With hedge funds’ capital changing hands, there exists a select group of noteworthy hedge fund managers who were upping their stakes significantly (or already accumulated large positions).

According to Insider Monkey’s hedge fund database, Ken Fisher’s Fisher Asset Management has the largest position in Stifel Financial Corp. (NYSE:SF), worth close to $85.5 million. Coming in second is PAR Capital Management, led by Paul Reeder and Edward Shapiro, holding a $13.5 million position. Remaining members of the smart money that are bullish contain Millennium Management, one of the largest hedge funds in the world, Ken Griffin’s Citadel Investment Group, and David E. Shaw’s D E Shaw. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.

Now that we’ve mentioned the most bullish investors, let’s also take a look at some funds that cashed in their entire stakes in the stock during the third quarter. It’s worth mentioning that Robert Pohly’s Samlyn Capital cashed in the largest stake of the 700 funds studied by Insider Monkey, valued at about $23.1 million in stock, and Anton Schutz’s Mendon Capital Advisors was right behind this move, as the fund sold off about $3.1 million worth of shares.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Stifel Financial Corp. (NYSE:SF) but similarly valued. We will take a look at PriceSmart, Inc. (NASDAQ:PSMT), InterOil Corporation (USA) (NYSE:IOC), Kennedy-Wilson Holdings Inc (NYSE:KW), and TiVo Inc. (NASDAQ:TIVO). All of these stocks’ market caps are similar to SF’s market cap.

As you can see these stocks had an average of 15 hedge funds with bullish positions and the average amount invested in these stocks was $278 million. That figure was $127 million in SF’s case. TiVo Inc. (NASDAQ:TIVO) is the most popular stock in this table. On the other hand PriceSmart, Inc. (NASDAQ:PSMT) is the least popular one with only 5 bullish hedge fund positions. Stifel Financial Corp. (NYSE:SF) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard TIVO might be a better candidate to consider taking a long position in.

Disclosure: None