At Insider Monkey, we pore over the filings of nearly 750 top investment firms every quarter, a process we have now completed for the latest reporting period. The data we've gathered as a result gives us access to a wealth of collective knowledge based on these firms' portfolio holdings as of June 28. In this article, we will use that wealth of knowledge to determine whether or not Sonoco Products Company (NYSE:SON) makes for a good investment right now.
Sonoco Products Company (NYSE:SON) was in 19 hedge funds' portfolios at the end of June. SON has experienced an increase in activity from the world's largest hedge funds recently. There were 17 hedge funds in our database with SON positions at the end of the previous quarter. Our calculations also showed that SON isn't among the 30 most popular stocks among hedge funds (view the video below).
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds' small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren't comfortable with shorting stocks, you should at least avoid initiating long positions in our short portfolio.
SON_oct2019
Unlike some fund managers who are betting on Dow reaching 40000 in a year, our long-short investment strategy doesn't rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. Let's take a glance at the recent hedge fund action regarding Sonoco Products Company (NYSE:SON).
How have hedgies been trading Sonoco Products Company (NYSE:SON)?
At Q2's end, a total of 19 of the hedge funds tracked by Insider Monkey were long this stock, a change of 12% from the previous quarter. By comparison, 20 hedge funds held shares or bullish call options in SON a year ago. With hedgies' capital changing hands, there exists a few notable hedge fund managers who were boosting their stakes substantially (or already accumulated large positions).
CHILTON INVESTMENT COMPANY
The largest stake in Sonoco Products Company (NYSE:SON) was held by Impax Asset Management, which reported holding $32 million worth of stock at the end of March. It was followed by AQR Capital Management with a $28.8 million position. Other investors bullish on the company included Royce & Associates, GAMCO Investors, and Renaissance Technologies.
As aggregate interest increased, some big names were breaking ground themselves. Perella Weinberg Partners, assembled the most valuable position in Sonoco Products Company (NYSE:SON). Perella Weinberg Partners had $1.6 million invested in the company at the end of the quarter. Richard Chilton's Chilton Investment Company also made a $1.3 million investment in the stock during the quarter. The other funds with brand new SON positions are Richard Driehaus's Driehaus Capital, Michael Gelband's ExodusPoint Capital, and Israel Englander's Millennium Management.
Let's also examine hedge fund activity in other stocks similar to Sonoco Products Company (NYSE:SON). These stocks are Logitech International SA (NASDAQ:LOGI), ANGI Homeservices Inc. (NASDAQ:ANGI), GCI Liberty, Inc. (NASDAQ:GLIBA), and Tripadvisor Inc (NASDAQ:TRIP). This group of stocks' market values are closest to SON's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position LOGI,16,207640,1 ANGI,20,206353,-2 GLIBA,38,2029549,2 TRIP,26,1216550,-1 Average,25,915023,0 [/table]
As you can see these stocks had an average of 25 hedge funds with bullish positions and the average amount invested in these stocks was $915 million. That figure was $122 million in SON's case. GCI Liberty, Inc. (NASDAQ:GLIBA) is the most popular stock in this table. On the other hand Logitech International SA (NASDAQ:LOGI) is the least popular one with only 16 bullish hedge fund positions. Sonoco Products Company (NYSE:SON) 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. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately SON wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); SON investors were disappointed as the stock returned -10.3% during the third quarter 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 in 2019.
Disclosure: None. This article was originally published at Insider Monkey.
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