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Did Hedge Funds Drop The Ball On Stericycle Inc (SRCL) ?

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 more than 730 13F filings submitted by hedge funds and prominent investors. These filings show these funds’ portfolio positions as of June 28th, 2019. In this article we are going to take a look at smart money sentiment towards Stericycle Inc (NASDAQ:SRCL).

Is Stericycle Inc (NASDAQ:SRCL) the right investment to pursue these days? Prominent investors are in a pessimistic mood. The number of bullish hedge fund bets were cut by 6 lately. Our calculations also showed that SRCL 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.

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 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 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 25.7% through September 30, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

John Rogers Ariel Investments

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 take a look at the latest hedge fund action regarding Stericycle Inc (NASDAQ:SRCL).

How are hedge funds trading Stericycle Inc (NASDAQ:SRCL)?

At Q2’s end, a total of 16 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -27% from the previous quarter. By comparison, 24 hedge funds held shares or bullish call options in SRCL a year ago. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

SRCL_oct2019

The largest stake in Stericycle Inc (NASDAQ:SRCL) was held by Ariel Investments, which reported holding $155.5 million worth of stock at the end of March. It was followed by Iridian Asset Management with a $149.3 million position. Other investors bullish on the company included Generation Investment Management, Diamond Hill Capital, and Polar Capital.

Because Stericycle Inc (NASDAQ:SRCL) has witnessed declining sentiment from the aggregate hedge fund industry, we can see that there were a few money managers who were dropping their positions entirely by the end of the second quarter. It’s worth mentioning that Steve Cohen’s Point72 Asset Management cut the largest stake of all the hedgies watched by Insider Monkey, totaling an estimated $10.2 million in stock. Dmitry Balyasny’s fund, Balyasny Asset Management, also said goodbye to its stock, about $8.3 million worth. These moves are interesting, as aggregate hedge fund interest fell by 6 funds by the end of the second quarter.

Let’s check out hedge fund activity in other stocks similar to Stericycle Inc (NASDAQ:SRCL). We will take a look at Compania de Minas Buenaventura SA (NYSE:BVN), DCP Midstream LP (NYSE:DCP), Carter’s, Inc. (NYSE:CRI), and SLM Corp (NASDAQ:SLM). This group of stocks’ market values resemble SRCL’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
BVN 7 16086 0
DCP 2 13029 0
CRI 25 192467 6
SLM 32 607447 3
Average 16.5 207257 2.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 16.5 hedge funds with bullish positions and the average amount invested in these stocks was $207 million. That figure was $648 million in SRCL’s case. SLM Corp (NASDAQ:SLM) is the most popular stock in this table. On the other hand DCP Midstream LP (NYSE:DCP) is the least popular one with only 2 bullish hedge fund positions. Stericycle Inc (NASDAQ:SRCL) 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 SRCL as the stock returned 6.7% during the same time frame and outperformed the market by an even larger margin.

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

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