Hedge Funds Aren’t Crazy About Schnitzer Steel Industries, Inc. (SCHN) Anymore
Reymerlyn Martin
The 700+ hedge funds and famous money managers tracked by Insider Monkey have already compiled and submitted their 13F filings for the third quarter, which unveil their equity positions as of September 30. We went through these filings, fixed typos and other more significant errors and identified the changes in hedge fund portfolios. Our extensive review of these public filings is finally over, so this article is set to reveal the smart money sentiment towards Schnitzer Steel Industries, Inc. (NASDAQ:SCHN).
Is Schnitzer Steel Industries, Inc. (NASDAQ:SCHN) a buy right now? Hedge funds are reducing their bets on the stock. The number of bullish hedge fund bets were cut by 1 recently. Our calculations also showed that SCHN isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Why do we pay any attention at all to hedge fund sentiment? 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.
Paul Tudor Jones of Tudor Investment Corp[/caption]
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 take a glance at the fresh hedge fund action regarding Schnitzer Steel Industries, Inc. (NASDAQ:SCHN).
How have hedgies been trading Schnitzer Steel Industries, Inc. (NASDAQ:SCHN)?
At Q3's end, a total of 11 of the hedge funds tracked by Insider Monkey were long this stock, a change of -8% from the second quarter of 2019. By comparison, 19 hedge funds held shares or bullish call options in SCHN a year ago. 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, Renaissance Technologies held the most valuable stake in Schnitzer Steel Industries, Inc. (NASDAQ:SCHN), which was worth $6.3 million at the end of the third quarter. On the second spot was Arrowstreet Capital which amassed $5.4 million worth of shares. Royce & Associates, AQR Capital Management, and Winton Capital Management 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 Royce & Associates allocated the biggest weight to Schnitzer Steel Industries, Inc. (NASDAQ:SCHN), around 0.03% of its 13F portfolio. Tudor Investment Corp is also relatively very bullish on the stock, designating 0.03 percent of its 13F equity portfolio to SCHN.
Since Schnitzer Steel Industries, Inc. (NASDAQ:SCHN) has witnessed declining sentiment from the entirety of the hedge funds we track, we can see that there exists a select few fund managers that elected to cut their full holdings by the end of the third quarter. It's worth mentioning that Paul Marshall and Ian Wace's Marshall Wace dumped the biggest stake of the 750 funds followed by Insider Monkey, valued at an estimated $4.1 million in stock, and John Thiessen's Vertex One Asset Management was right behind this move, as the fund sold off about $1 million worth. These moves are important to note, as total hedge fund interest fell by 1 funds by the end of the third quarter.
Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as Schnitzer Steel Industries, Inc. (NASDAQ:SCHN) but similarly valued. These stocks are Heska Corp (NASDAQ:HSKA), Axcelis Technologies Inc (NASDAQ:ACLS), Morphic Holding, Inc. (NASDAQ:MORF), and AudioCodes Ltd. (NASDAQ:AUDC). This group of stocks' market valuations match SCHN's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position HSKA,12,51094,-1 ACLS,15,86778,1 MORF,3,51522,-3 AUDC,13,22667,2 Average,10.75,53015,-0.25 [/table]
As you can see these stocks had an average of 10.75 hedge funds with bullish positions and the average amount invested in these stocks was $53 million. That figure was $22 million in SCHN's case. Axcelis Technologies Inc (NASDAQ:ACLS) is the most popular stock in this table. On the other hand Morphic Holding, Inc. (NASDAQ:MORF) is the least popular one with only 3 bullish hedge fund positions. Schnitzer Steel Industries, Inc. (NASDAQ:SCHN) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we'd rather spend our time researching stocks that hedge funds are piling on. 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. Unfortunately SCHN wasn't nearly as popular as these 20 stocks and hedge funds that were betting on SCHN were disappointed as the stock returned 5.3% during the fourth quarter (through the end of November) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
Disclosure: None. This article was originally published at Insider Monkey.
