Did Hedge Funds Make The Right Call On State Street Corporation (STT) ?

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 State Street Corporation (NYSE:STT) based on that data and determine whether they were really smart about the stock.

Is State Street Corporation (NYSE:STT) a healthy stock for your portfolio? Investors who are in the know were becoming less hopeful. The number of long hedge fund positions were trimmed by 11 lately. Our calculations also showed that STT 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). STT was in 34 hedge funds’ portfolios at the end of March. There were 45 hedge funds in our database with STT positions at the end of the previous quarter.

Video: 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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 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.


Louis Bacon Moore of Moore Capital

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 gander at the latest hedge fund action regarding State Street Corporation (NYSE:STT).

Hedge fund activity in State Street Corporation (NYSE:STT)

At Q1’s end, a total of 34 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -24% from the previous quarter. On the other hand, there were a total of 32 hedge funds with a bullish position in STT a year ago. With the smart money’s capital changing hands, there exists a few noteworthy hedge fund managers who were boosting their stakes considerably (or already accumulated large positions).

Is STT A Good Stock To Buy?

Of the funds tracked by Insider Monkey, Donald Yacktman’s Yacktman Asset Management has the biggest position in State Street Corporation (NYSE:STT), worth close to $193.4 million, comprising 3.2% of its total 13F portfolio. On Yacktman Asset Management’s heels is GAMCO Investors, managed by Mario Gabelli, which holds a $63.6 million position; the fund has 0.8% of its 13F portfolio invested in the stock. Remaining professional money managers that hold long positions encompass John Overdeck and David Siegel’s Two Sigma Advisors, Cliff Asness’s AQR Capital Management and  Renaissance Technologies. In terms of the portfolio weights assigned to each position Yacktman Asset Management allocated the biggest weight to State Street Corporation (NYSE:STT), around 3.21% of its 13F portfolio. Gillson Capital is also relatively very bullish on the stock, dishing out 2.34 percent of its 13F equity portfolio to STT.

Due to the fact that State Street Corporation (NYSE:STT) has experienced falling interest from the aggregate hedge fund industry, it’s easy to see that there was a specific group of money managers that slashed their full holdings by the end of the first quarter. Interestingly, Anand Parekh’s Alyeska Investment Group cut the largest position of all the hedgies followed by Insider Monkey, comprising about $61.5 million in stock. Louis Bacon’s fund, Moore Global Investments, also sold off its stock, about $49.4 million worth. These moves are interesting, as aggregate hedge fund interest was cut by 11 funds by the end of the first quarter.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as State Street Corporation (NYSE:STT) but similarly valued. We will take a look at Sun Life Financial Inc. (NYSE:SLF), Franco-Nevada Corporation (NYSE:FNV), Welltower Inc. (NYSE:WELL), and TD Ameritrade Holding Corp. (NYSE:AMTD). This group of stocks’ market caps resemble STT’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
SLF 16 102769 0
FNV 21 896434 -3
WELL 25 313164 1
AMTD 46 1250217 -4
Average 27 640646 -1.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 27 hedge funds with bullish positions and the average amount invested in these stocks was $641 million. That figure was $503 million in STT’s case. TD Ameritrade Holding Corp. (NYSE:AMTD) is the most popular stock in this table. On the other hand Sun Life Financial Inc. (NYSE:SLF) is the least popular one with only 16 bullish hedge fund positions. State Street Corporation (NYSE:STT) 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 STT, though not to the same extent, as the stock returned 20.3% during the second quarter and outperformed the market as well.

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