We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (see why hell is coming).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. Insider Monkey finished processing 835 13F filings submitted by hedge funds and prominent investors. These filings show these funds’ portfolio positions as of December 31st, 2019. What do these smart investors think about State Street Corporation (NYSE:STT)?
State Street Corporation (NYSE:STT) was in 45 hedge funds’ portfolios at the end of the fourth quarter of 2019. STT shareholders have witnessed an increase in activity from the world’s largest hedge funds of late. There were 37 hedge funds in our database with STT holdings at the end of the previous quarter. Our calculations also showed that STT isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).
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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 41 percentage points since March 2017 (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 35.3% through March 3rd. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Louis Bacon Moore of Moore Capital
We leave no stone unturned when looking for the next great investment idea. For example, we believe electric vehicles and energy storage are set to become giant markets, and we want to take advantage of the declining lithium prices amid the COVID-19 pandemic. So we are checking out investment opportunities like this one. 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 S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now let’s go over the recent hedge fund action encompassing State Street Corporation (NYSE:STT).
How are hedge funds trading State Street Corporation (NYSE:STT)?
At Q4’s end, a total of 45 of the hedge funds tracked by Insider Monkey were long this stock, a change of 22% from one quarter earlier. By comparison, 32 hedge funds held shares or bullish call options in STT a year ago. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
When looking at the institutional investors followed by Insider Monkey, Yacktman Asset Management, managed by Donald Yacktman, holds the number one position in State Street Corporation (NYSE:STT). Yacktman Asset Management has a $314.6 million position in the stock, comprising 4% of its 13F portfolio. Sitting at the No. 2 spot is Citadel Investment Group, managed by Ken Griffin, which holds a $155 million position; the fund has 0.1% of its 13F portfolio invested in the stock. Some other professional money managers that are bullish consist of John Overdeck and David Siegel’s Two Sigma Advisors, Mario Gabelli’s GAMCO Investors and D. E. Shaw’s D E Shaw. In terms of the portfolio weights assigned to each position Azora Capital allocated the biggest weight to State Street Corporation (NYSE:STT), around 6.41% of its 13F portfolio. Yacktman Asset Management is also relatively very bullish on the stock, setting aside 3.98 percent of its 13F equity portfolio to STT.
With a general bullishness amongst the heavyweights, key hedge funds were breaking ground themselves. Alyeska Investment Group, managed by Anand Parekh, assembled the largest position in State Street Corporation (NYSE:STT). Alyeska Investment Group had $61.5 million invested in the company at the end of the quarter. Louis Bacon’s Moore Global Investments also made a $49.4 million investment in the stock during the quarter. The other funds with new positions in the stock are Robert Pohly’s Samlyn Capital, Daniel Johnson’s Gillson Capital, and Sander Gerber’s Hudson Bay Capital Management.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as State Street Corporation (NYSE:STT) but similarly valued. These stocks are The Williams Companies, Inc. (NYSE:WMB), China Unicom (Hong Kong) Limited (NYSE:CHU), Chunghwa Telecom Co., Ltd (NYSE:CHT), and Republic Services, Inc. (NYSE:RSG). This group of stocks’ market valuations resemble STT’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| WMB | 40 | 958886 | 0 |
| CHU | 11 | 60557 | 3 |
| CHT | 4 | 121280 | -1 |
| RSG | 26 | 684129 | -9 |
| Average | 20.25 | 456213 | -1.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 20.25 hedge funds with bullish positions and the average amount invested in these stocks was $456 million. That figure was $1287 million in STT’s case. The Williams Companies, Inc. (NYSE:WMB) is the most popular stock in this table. On the other hand Chunghwa Telecom Co., Ltd (NYSE:CHT) is the least popular one with only 4 bullish hedge fund positions. Compared to these stocks State Street Corporation (NYSE:STT) is more popular among hedge funds. 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 1.0% in 2020 through May 1st and still beat the market by 12.9 percentage points. Unfortunately STT wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on STT were disappointed as the stock returned -24.6% during the four months of 2020 (through May 1st) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
