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Did Hedge Funds Make The Right Call On Southern Copper Corporation (SCCO)?

The latest 13F reporting period has come and gone, and Insider Monkey have plowed through 821 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of March 31st, a week after the market trough. Now, we are almost done with the second quarter. Investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned almost 20% this quarter. In this article you are going to find out whether hedge funds thoughtSouthern Copper Corporation (NYSE:SCCO) was a good investment heading into the second quarter and how the stock traded in comparison to the top hedge fund picks.

Southern Copper Corporation (NYSE:SCCO) was in 19 hedge funds’ portfolios at the end of the first quarter of 2020. SCCO has experienced a decrease in support from the world’s most elite money managers of late. There were 20 hedge funds in our database with SCCO positions at the end of the previous quarter. Our calculations also showed that SCCO 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.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 58 percentage points since March 2017 (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 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Steven Cohen of Point72 Asset Management

At Insider Monkey we scour multiple sources to uncover the next great investment idea. Cannabis stocks are roaring back in 2020, so we are checking out this under-the-radar stock. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. Now let’s analyze the key hedge fund action encompassing Southern Copper Corporation (NYSE:SCCO).

Hedge fund activity in Southern Copper Corporation (NYSE:SCCO)

At the end of the first quarter, a total of 19 of the hedge funds tracked by Insider Monkey were long this stock, a change of -5% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards SCCO over the last 18 quarters. With the smart money’s positions undergoing their usual ebb and flow, there exists an “upper tier” of notable hedge fund managers who were increasing their stakes considerably (or already accumulated large positions).

The largest stake in Southern Copper Corporation (NYSE:SCCO) was held by Fisher Asset Management, which reported holding $95.9 million worth of stock at the end of September. It was followed by Hosking Partners with a $7.7 million position. Other investors bullish on the company included AQR Capital Management, Renaissance Technologies, and Millennium Management. In terms of the portfolio weights assigned to each position Hosking Partners allocated the biggest weight to Southern Copper Corporation (NYSE:SCCO), around 0.27% of its 13F portfolio. CSat Investment Advisory is also relatively very bullish on the stock, dishing out 0.15 percent of its 13F equity portfolio to SCCO.

Seeing as Southern Copper Corporation (NYSE:SCCO) has experienced a decline in interest from the aggregate hedge fund industry, we can see that there was a specific group of money managers that elected to cut their entire stakes heading into Q4. At the top of the heap, Ken Griffin’s Citadel Investment Group cut the largest investment of the “upper crust” of funds followed by Insider Monkey, comprising about $0.8 million in stock. Donald Sussman’s fund, Paloma Partners, also dropped its stock, about $0.7 million worth. These transactions are interesting, as total hedge fund interest was cut by 1 funds heading into Q4.

Let’s go over hedge fund activity in other stocks similar to Southern Copper Corporation (NYSE:SCCO). We will take a look at Amphenol Corporation (NYSE:APH), Dow Inc. (NYSE:DOW), Otis Worldwide Corporation (NYSE:OTIS), and FirstEnergy Corp. (NYSE:FE). This group of stocks’ market valuations match SCCO’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
APH 42 604137 6
DOW 38 375922 4
OTIS 4 13927 4
FE 44 1209775 4
Average 32 550940 4.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 32 hedge funds with bullish positions and the average amount invested in these stocks was $551 million. That figure was $134 million in SCCO’s case. FirstEnergy Corp. (NYSE:FE) is the most popular stock in this table. On the other hand Otis Worldwide Corporation (NYSE:OTIS) is the least popular one with only 4 bullish hedge fund positions. Southern Copper Corporation (NYSE:SCCO) is not the least popular stock in this group but hedge fund interest is still below 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 18.6% in 2020 through July 27th and still beat the market by 17.1 percentage points. A small number of hedge funds were also right about betting on SCCO as the stock returned 64.6% since the end of March and outperformed the market by an even larger margin.

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