Did Hedge Funds Drop The Ball On Steelcase Inc. (SCS) ?

Billionaire hedge fund managers such as David Abrams, Steve Cohen and Stan Druckenmiller can generate millions or even billions of dollars every year by pinning down high-potential small-cap stocks and pouring cash into these candidates. Small-cap stocks are overlooked by most investors, brokerage houses, and financial services hubs, while the nearly unlimited research abilities of the big players within the hedge fund industry can easily identify the undervalued and high-potential stocks that reside the ignored corners of equity markets. There are numerous small-cap stocks that have turned out to be great winners, which is one of the main reasons the Insider Monkey team pays close attention to the hedge fund activity in relation to these stocks.

Is Steelcase Inc. (NYSE:SCS) a bargain? Prominent investors are becoming less confident. The number of long hedge fund positions decreased by 5 lately. Our calculations also showed that SCS isn’t among the 30 most popular stocks among hedge funds (view the video below). SCS was in 19 hedge funds’ portfolios at the end of June. There were 24 hedge funds in our database with SCS holdings at the end of the previous quarter.
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

If you’d ask most investors, hedge funds are viewed as slow, old financial tools of the past. While there are more than 8000 funds trading at the moment, Our experts look at the masters of this club, approximately 750 funds. It is estimated that this group of investors shepherd the lion’s share of the smart money’s total asset base, and by monitoring their best stock picks, Insider Monkey has identified a number of investment strategies that have historically outrun the S&P 500 index. Insider Monkey’s flagship hedge fund strategy surpassed the S&P 500 index by around 5 percentage points a year since its inception in May 2014. We were able to generate large returns even by identifying short candidates. Our portfolio of short stocks lost 25.7% since February 2017 (through September 30th) even though the market was up more than 33% during the same period. We just shared a list of 10 short targets in our latest quarterly update .

John Overdeck of Two Sigma

Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, 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. We’re going to go over the new hedge fund action regarding Steelcase Inc. (NYSE:SCS).

How have hedgies been trading Steelcase Inc. (NYSE:SCS)?

Heading into the third quarter of 2019, a total of 19 of the hedge funds tracked by Insider Monkey were long this stock, a change of -21% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards SCS over the last 16 quarters. With hedgies’ sentiment swirling, there exists an “upper tier” of key hedge fund managers who were boosting their stakes substantially (or already accumulated large positions).

No of Hedge Funds with SCS Positions

The largest stake in Steelcase Inc. (NYSE:SCS) was held by Pzena Investment Management, which reported holding $14.3 million worth of stock at the end of March. It was followed by Renaissance Technologies with a $11.5 million position. Other investors bullish on the company included AQR Capital Management, GLG Partners, and Two Sigma Advisors.

Because Steelcase Inc. (NYSE:SCS) has witnessed a decline in interest from the entirety of the hedge funds we track, it’s easy to see that there lies a certain “tier” of funds that elected to cut their entire stakes by the end of the second quarter. Intriguingly, Andrew Feldstein and Stephen Siderow’s Blue Mountain Capital dumped the largest position of all the hedgies followed by Insider Monkey, comprising about $1.1 million in stock. Paul Tudor Jones’s fund, Tudor Investment Corp, also said goodbye to its stock, about $0.9 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest dropped by 5 funds by the end of the second quarter.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Steelcase Inc. (NYSE:SCS) but similarly valued. We will take a look at Tenet Healthcare Corporation (NYSE:THC), Groupon Inc (NASDAQ:GRPN), Acushnet Holdings Corp. (NYSE:GOLF), and Hilltop Holdings Inc. (NYSE:HTH). All of these stocks’ market caps match SCS’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
THC 30 669380 6
GRPN 24 391895 -2
GOLF 11 22113 -2
HTH 18 107708 -1
Average 20.75 297774 0.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 20.75 hedge funds with bullish positions and the average amount invested in these stocks was $298 million. That figure was $72 million in SCS’s case. Tenet Healthcare Corporation (NYSE:THC) is the most popular stock in this table. On the other hand Acushnet Holdings Corp. (NYSE:GOLF) is the least popular one with only 11 bullish hedge fund positions. Steelcase Inc. (NYSE:SCS) is not the least popular stock in this group but hedge fund interest is still below average. 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. A small number of hedge funds were also right about betting on SCS as the stock returned 8.5% during the same time frame and outperformed the market by an even larger margin.

Disclosure: None. This article was originally published at Insider Monkey.