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Did Hedge Funds Make The Right Call On Sealed Air Corporation (SEE) ?

We know that hedge funds generate strong, risk-adjusted returns over the long run, which is why imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, professional investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do. However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, let’s examine the smart money sentiment towards Sealed Air Corporation (NYSE:SEE) and determine whether hedge funds skillfully traded this stock.

Sealed Air Corporation (NYSE:SEE) was in 29 hedge funds’ portfolios at the end of March. SEE shareholders have witnessed a decrease in enthusiasm from smart money of late. There were 30 hedge funds in our database with SEE holdings at the end of the previous quarter. Our calculations also showed that SEE isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).

Video: Watch our video about the top 5 most popular hedge fund stocks.

According to most traders, hedge funds are perceived as worthless, outdated investment vehicles of the past. While there are over 8000 funds with their doors open today, Our researchers hone in on the top tier of this group, about 850 funds. It is estimated that this group of investors oversee the majority of all hedge funds’ total asset base, and by watching their matchless picks, Insider Monkey has revealed various investment strategies that have historically outpaced Mr. Market. Insider Monkey’s flagship short hedge fund strategy beat the S&P 500 short ETFs by around 20 percentage points per annum since its inception in March 2017. Our portfolio of short stocks lost 36% since February 2017 (through May 18th) even though the market was up 30% during the same period. We just shared a list of 8 short targets in our latest quarterly update .

Noam Gottesman GLG Partners

Noam Gottesman of GLG Partners

At Insider Monkey we scour multiple sources to uncover the next great investment idea. There is a lot of volatility in the markets and this presents amazing investment opportunities from time to time. For example, this trader claims to deliver juiced up returns with one trade a week, so we are checking out his highest conviction idea. A second trader claims to score lucrative profits by utilizing a “weekend trading strategy”, so we look into his strategy’s picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We recently recommended several stocks partly inspired by legendary Bill Miller’s investor letter. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind let’s take a peek at the key hedge fund action regarding Sealed Air Corporation (NYSE:SEE).

What have hedge funds been doing with Sealed Air Corporation (NYSE:SEE)?

At Q1’s end, a total of 29 of the hedge funds tracked by Insider Monkey were long this stock, a change of -3% from one quarter earlier. On the other hand, there were a total of 29 hedge funds with a bullish position in SEE a year ago. With hedgies’ capital changing hands, there exists a select group of key hedge fund managers who were boosting their holdings substantially (or already accumulated large positions).

Is SEE A Good Stock To Buy?

The largest stake in Sealed Air Corporation (NYSE:SEE) was held by Rivulet Capital, which reported holding $190.4 million worth of stock at the end of September. It was followed by Kensico Capital with a $163.7 million position. Other investors bullish on the company included Eminence Capital, Nitorum Capital, and Impax Asset Management. In terms of the portfolio weights assigned to each position Rivulet Capital allocated the biggest weight to Sealed Air Corporation (NYSE:SEE), around 12.19% of its 13F portfolio. Hawk Ridge Management is also relatively very bullish on the stock, setting aside 5.77 percent of its 13F equity portfolio to SEE.

Because Sealed Air Corporation (NYSE:SEE) has experienced a decline in interest from the entirety of the hedge funds we track, it’s easy to see that there was a specific group of fund managers who sold off their entire stakes heading into Q4. Intriguingly, Noam Gottesman’s GLG Partners said goodbye to the largest stake of all the hedgies tracked by Insider Monkey, worth close to $4.3 million in stock, and Benjamin A. Smith’s Laurion Capital Management was right behind this move, as the fund dropped about $1.7 million worth. These moves are intriguing to say the least, as total hedge fund interest was cut by 1 funds heading into Q4.

Let’s check out hedge fund activity in other stocks similar to Sealed Air Corporation (NYSE:SEE). These stocks are KT Corporation (NYSE:KT), Armstrong World Industries, Inc. (NYSE:AWI), First Solar, Inc. (NASDAQ:FSLR), and Landstar System, Inc. (NASDAQ:LSTR). This group of stocks’ market caps resemble SEE’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
KT 15 159253 -2
AWI 20 323045 -4
FSLR 22 150839 -2
LSTR 22 156653 -2
Average 19.75 197448 -2.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 19.75 hedge funds with bullish positions and the average amount invested in these stocks was $197 million. That figure was $702 million in SEE’s case. First Solar, Inc. (NASDAQ:FSLR) is the most popular stock in this table. On the other hand KT Corporation (NYSE:KT) is the least popular one with only 15 bullish hedge fund positions. Compared to these stocks Sealed Air Corporation (NYSE:SEE) is more popular among hedge funds. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks returned 12.3% in 2020 through June 30th but still managed to beat the market by 15.5 percentage points. Hedge funds were also right about betting on SEE as the stock returned 33.6% in Q2 and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.

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