The Insider Monkey team has completed processing the quarterly 13F filings for the September quarter submitted by the hedge funds and other money managers included in our extensive database. Most hedge fund investors experienced strong gains on the back of a strong market performance, which certainly propelled them to adjust their equity holdings so as to maintain the desired risk profile. As a result, the relevancy of these public filings and their content is indisputable, as they may reveal numerous high-potential stocks. The following article will discuss the smart money sentiment towards Stellus Capital Investment Corporation (NYSE:SCM).
Stellus Capital Investment Corporation (NYSE:SCM) shares haven’t seen a lot of action during the second quarter. Overall, hedge fund sentiment was unchanged. The stock was in 6 hedge funds’ portfolios at the end of the third quarter of 2020. Our calculations also showed that SCM isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks). At the end of this article we will also compare SCM to other stocks including Telenav Inc (NASDAQ:TNAV), New Age, Inc. (NASDAQ:NBEV), and Ampio Pharmaceuticals, Inc. (NYSE:AMPE) to get a better sense of its popularity.
Video: 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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 66 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 13% through November 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
David Harding of Winton Capital Management
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. Now let’s analyze the latest hedge fund action surrounding Stellus Capital Investment Corporation (NYSE:SCM).
What does smart money think about Stellus Capital Investment Corporation (NYSE:SCM)?
At the end of September, a total of 6 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from the second quarter of 2020. The graph below displays the number of hedge funds with bullish position in SCM over the last 21 quarters. With hedgies’ positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were boosting their holdings considerably (or already accumulated large positions).
According to Insider Monkey’s hedge fund database, Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, holds the most valuable position in Stellus Capital Investment Corporation (NYSE:SCM). Arrowstreet Capital has a $2.1 million position in the stock, comprising less than 0.1%% of its 13F portfolio. Coming in second is David Harding of Winton Capital Management, with a $0.8 million position; less than 0.1%% of its 13F portfolio is allocated to the stock. Other members of the smart money with similar optimism encompass John Overdeck and David Siegel’s Two Sigma Advisors, James Morrow’s Callodine Capital Management and Ken Griffin’s Citadel Investment Group. In terms of the portfolio weights assigned to each position Callodine Capital Management allocated the biggest weight to Stellus Capital Investment Corporation (NYSE:SCM), around 0.21% of its 13F portfolio. Winton Capital Management is also relatively very bullish on the stock, setting aside 0.03 percent of its 13F equity portfolio to SCM.
We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: ExodusPoint Capital. One hedge fund selling its entire position doesn’t always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don’t think this is the case in this case because only one of the 800+ hedge funds tracked by Insider Monkey identified as a viable investment and initiated a position in the stock (that fund was Callodine Capital Management).
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Stellus Capital Investment Corporation (NYSE:SCM) but similarly valued. These stocks are Telenav Inc (NASDAQ:TNAV), New Age, Inc. (NASDAQ:NBEV), Ampio Pharmaceuticals, Inc. (NNYSE:AMPE), Kindred Biosciences Inc (NASDAQ:KIN), GasLog Partners LP (NYSE:GLOP), Earthstone Energy, Inc. (NYSE:ESTE), and Team, Inc. (NYSE:TISI). This group of stocks’ market caps match SCM’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| TNAV | 11 | 31469 | 1 |
| NBEV | 4 | 712 | -1 |
| AMPE | 2 | 67 | 1 |
| KIN | 11 | 50510 | -1 |
| GLOP | 5 | 638 | -2 |
| ESTE | 3 | 3571 | -3 |
| TISI | 15 | 45652 | 3 |
| Average | 7.3 | 18946 | -0.3 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 7.3 hedge funds with bullish positions and the average amount invested in these stocks was $19 million. That figure was $4 million in SCM’s case. Team, Inc. (NYSE:TISI) is the most popular stock in this table. On the other hand Ampio Pharmaceuticals, Inc. (NYSE:AMPE) is the least popular one with only 2 bullish hedge fund positions. Stellus Capital Investment Corporation (NYSE:SCM) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for SCM is 50.4. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 30.7% in 2020 through November 27th and still beat the market by 16.1 percentage points. A small number of hedge funds were also right about betting on SCM as the stock returned 31% since the end of the third quarter (through 11/27) and outperformed the market by an even larger margin.
Follow Stellus Capital Investment Corp (NYSE:SCM)
Follow Stellus Capital Investment Corp (NYSE:SCM)
Disclosure: None. This article was originally published at Insider Monkey.
