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Did Hedge Funds Make The Right Call On Sensata Technologies Holding plc (ST) ?

Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the first quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 4.5 years and analyze what the smart money thinks of Sensata Technologies Holding plc (NYSE:ST) based on that data and determine whether they were really smart about the stock.

Is Sensata Technologies Holding plc (NYSE:ST) ready to rally soon? Hedge funds were betting on the stock. The number of bullish hedge fund bets went up by 3 lately. Our calculations also showed that ST 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 shareholders, hedge funds are seen as unimportant, old investment vehicles of years past. While there are more than 8000 funds with their doors open today, Our researchers choose to focus on the elite of this group, about 850 funds. Most estimates calculate that this group of people orchestrate most of all hedge funds’ total capital, and by tracking their finest equity investments, Insider Monkey has formulated a few investment strategies that have historically exceeded Mr. Market. Insider Monkey’s flagship short hedge fund strategy outrun 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 .

GOTHAM ASSET MANAGEMENT

Joel Greenblatt of Gotham Asset Management

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. Now let’s take a glance at the recent hedge fund action regarding Sensata Technologies Holding plc (NYSE:ST).

What does smart money think about Sensata Technologies Holding plc (NYSE:ST)?

At Q1’s end, a total of 26 of the hedge funds tracked by Insider Monkey were long this stock, a change of 13% from the previous quarter. On the other hand, there were a total of 21 hedge funds with a bullish position in ST a year ago. With hedge funds’ capital changing hands, there exists a few key hedge fund managers who were upping their holdings significantly (or already accumulated large positions).

Among these funds, Generation Investment Management held the most valuable stake in Sensata Technologies Holding plc (NYSE:ST), which was worth $353 million at the end of the third quarter. On the second spot was Orbis Investment Management which amassed $112.8 million worth of shares. Diamond Hill Capital, Impax Asset Management, and Arrowstreet Capital 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 Goodnow Investment Group allocated the biggest weight to Sensata Technologies Holding plc (NYSE:ST), around 2.74% of its 13F portfolio. Generation Investment Management is also relatively very bullish on the stock, setting aside 2.51 percent of its 13F equity portfolio to ST.

As aggregate interest increased, key hedge funds were leading the bulls’ herd. Ariose Capital, managed by Yi Xin, established the largest position in Sensata Technologies Holding plc (NYSE:ST). Ariose Capital had $1.9 million invested in the company at the end of the quarter. Charles Davidson and Joseph Jacobs’s Wexford Capital also made a $1.7 million investment in the stock during the quarter. The other funds with new positions in the stock are Joel Greenblatt’s Gotham Asset Management, Ryan Tolkin (CIO)’s Schonfeld Strategic Advisors, and John Overdeck and David Siegel’s Two Sigma Advisors.

Let’s also examine hedge fund activity in other stocks similar to Sensata Technologies Holding plc (NYSE:ST). We will take a look at Prosperity Bancshares, Inc. (NYSE:PB), Owl Rock Capital Corporation (NYSE:ORCC), Elastic N.V. (NYSE:ESTC), and WEX Inc (NYSE:WEX). This group of stocks’ market valuations match ST’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
PB 16 81448 -6
ORCC 11 118961 3
ESTC 33 835088 -6
WEX 35 354821 10
Average 23.75 347580 0.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 23.75 hedge funds with bullish positions and the average amount invested in these stocks was $348 million. That figure was $700 million in ST’s case. WEX Inc (NYSE:WEX) is the most popular stock in this table. On the other hand Owl Rock Capital Corporation (NYSE:ORCC) is the least popular one with only 11 bullish hedge fund positions. Sensata Technologies Holding plc (NYSE:ST) is not the most popular stock in this group but hedge fund interest is still above average. 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 gained 12.3% in 2020 through June 30th but still beat the market by 15.5 percentage points. Hedge funds were also right about betting on ST as the stock returned 28.7% in Q2 and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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