We are still in an overall bull market and many stocks that smart money investors were piling into surged through the end of November. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 54% and 51% respectively. Hedge funds’ top 3 stock picks returned 41.7% this year and beat the S&P 500 ETFs by 14 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like Shaw Communications Inc (NYSE:SJR).
Hedge fund interest in Shaw Communications Inc (NYSE:SJR) shares was flat at the end of last quarter. This is usually a negative indicator. At the end of this article we will also compare SJR to other stocks including American Financial Group, Inc. (NYSE:AFG), Huazhu Group Limited (NASDAQ:HTHT), and Viacom, Inc. (NASDAQ:VIAB) to get a better sense of its popularity.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
John Overdeck of Two Sigma Advisors
We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We even check out this option genius’ weekly trade ideas. This December we recommended Adams Energy based on an under-the-radar fund manager’s investor letter and the stock gained 20 percent. Let’s take a peek at the fresh hedge fund action regarding Shaw Communications Inc (NYSE:SJR).
Hedge fund activity in Shaw Communications Inc (NYSE:SJR)
At Q3’s end, a total of 12 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from one quarter earlier. On the other hand, there were a total of 16 hedge funds with a bullish position in SJR a year ago. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Citadel Investment Group held the most valuable stake in Shaw Communications Inc (NYSE:SJR), which was worth $124.1 million at the end of the third quarter. On the second spot was Renaissance Technologies which amassed $93.1 million worth of shares. Two Sigma Advisors, Arrowstreet Capital, and D E Shaw 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 Signition LP allocated the biggest weight to Shaw Communications Inc (NYSE:SJR), around 1.69% of its 13F portfolio. Renaissance Technologies is also relatively very bullish on the stock, setting aside 0.08 percent of its 13F equity portfolio to SJR.
Due to the fact that Shaw Communications Inc (NYSE:SJR) has faced falling interest from the aggregate hedge fund industry, it’s easy to see that there were a few hedge funds that slashed their positions entirely last quarter. Intriguingly, Matthew Tewksbury’s Stevens Capital Management dropped the biggest position of all the hedgies followed by Insider Monkey, valued at an estimated $1 million in stock, and Minhua Zhang’s Weld Capital Management was right behind this move, as the fund dumped about $0.7 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Shaw Communications Inc (NYSE:SJR) but similarly valued. These stocks are American Financial Group, Inc. (NYSE:AFG), Huazhu Group Limited (NASDAQ:HTHT), Viacom, Inc. (NASDAQ:VIAB), and LKQ Corporation (NASDAQ:LKQ). This group of stocks’ market values resemble SJR’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| AFG | 24 | 421046 | 2 |
| HTHT | 16 | 192637 | 2 |
| VIAB | 37 | 727074 | -4 |
| LKQ | 41 | 1409448 | -4 |
| Average | 29.5 | 687551 | -1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 29.5 hedge funds with bullish positions and the average amount invested in these stocks was $688 million. That figure was $270 million in SJR’s case. LKQ Corporation (NASDAQ:LKQ) is the most popular stock in this table. On the other hand Huazhu Group Limited (NASDAQ:HTHT) is the least popular one with only 16 bullish hedge fund positions. Compared to these stocks Shaw Communications Inc (NYSE:SJR) is even less popular than HTHT. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. A small number of hedge funds were also right about betting on SJR, though not to the same extent, as the stock returned 6.7% during the fourth quarter (through 11/30) and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.
