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Did Hedge Funds Make The Right Call On Store Capital Corporation (STOR) ?

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 thoughtStore Capital Corporation (NYSE:STOR) was a good investment heading into the second quarter and how the stock traded in comparison to the top hedge fund picks.

Is Store Capital Corporation (NYSE:STOR) a safe investment now? The best stock pickers were turning bullish. The number of bullish hedge fund bets moved up by 5 lately. Our calculations also showed that STOR 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.

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 101% since March 2017 and outperformed the S&P 500 ETFs by more than 58 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Steven Cohen

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, legal marijuana is one of the fastest growing industries right now, so we are checking out stock pitches like “the Starbucks of cannabis” to identify the next tenbagger. 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. Hedge fund sentiment towards Tesla reached its all time high at the end of 2019 and Tesla shares more than tripled this year. We are trying to identify other EV revolution winners, so if you have any good ideas send us an email. Now we’re going to take a gander at the latest hedge fund action encompassing Store Capital Corporation (NYSE:STOR).

What have hedge funds been doing with Store Capital Corporation (NYSE:STOR)?

At the end of the first quarter, a total of 25 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 25% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards STOR over the last 18 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is STOR A Good Stock To Buy?

The largest stake in Store Capital Corporation (NYSE:STOR) was held by Berkshire Hathaway, which reported holding $337.4 million worth of stock at the end of September. It was followed by Two Sigma Advisors with a $39 million position. Other investors bullish on the company included Hudson Executive Capital, Renaissance Technologies, and Millennium Management. In terms of the portfolio weights assigned to each position Hudson Executive Capital allocated the biggest weight to Store Capital Corporation (NYSE:STOR), around 2.04% of its 13F portfolio. Magnolia Capital Fund is also relatively very bullish on the stock, designating 0.35 percent of its 13F equity portfolio to STOR.

As one would reasonably expect, some big names have jumped into Store Capital Corporation (NYSE:STOR) headfirst. Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, initiated the biggest position in Store Capital Corporation (NYSE:STOR). Arrowstreet Capital had $5.4 million invested in the company at the end of the quarter. Adam Peterson’s Magnolia Capital Fund also initiated a $2.2 million position during the quarter. The other funds with brand new STOR positions are Dmitry Balyasny’s Balyasny Asset Management, Paul Tudor Jones’s Tudor Investment Corp, and Ryan Tolkin (CIO)’s Schonfeld Strategic Advisors.

Let’s check out hedge fund activity in other stocks similar to Store Capital Corporation (NYSE:STOR). These stocks are Stericycle Inc (NASDAQ:SRCL), Life Storage, Inc. (NYSE:LSI), ONE Gas Inc (NYSE:OGS), and LHC Group, Inc. (NASDAQ:LHCG). This group of stocks’ market valuations match STOR’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
SRCL 20 571854 -4
LSI 22 155858 2
OGS 16 55599 0
LHCG 27 152070 1
Average 21.25 233845 -0.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 21.25 hedge funds with bullish positions and the average amount invested in these stocks was $234 million. That figure was $444 million in STOR’s case. LHC Group, Inc. (NASDAQ:LHCG) is the most popular stock in this table. On the other hand ONE Gas Inc (NYSE:OGS) is the least popular one with only 16 bullish hedge fund positions. Store Capital Corporation (NYSE:STOR) 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 STOR as the stock returned 33.4% 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.