Coronavirus is probably the #1 concern in investors’ minds right now. It should be. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW. We predicted that a US recession is imminent and US stocks will go down by at least 20% in the next 3-6 months. We also told you to short the market ETFs and buy long-term bonds. Investors who agreed with us and replicated these trades are up double digits whereas the market is down double digits. Our article also called for a total international travel ban to prevent the spread of the coronavirus especially from Europe. We were one step ahead of the markets and the president (see why hell is coming).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. Keeping this in mind, let’s analyze whether SiteOne Landscape Supply, Inc. (NYSE:SITE) is a good investment right now by following the lead of some of the best investors in the world and piggybacking their ideas. There’s no better way to get these firms’ immense resources and analytical capabilities working for us than to follow their lead into their best ideas. While not all of these picks will be winners, our research shows that these picks historically outperformed the market when we factor in known risk factors.
Is SiteOne Landscape Supply, Inc. (NYSE:SITE) ready to rally soon? Investors who are in the know are becoming more confident. The number of bullish hedge fund bets moved up by 1 in recent months. Our calculations also showed that SITE isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).
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 72.9% since March 2017 and outperformed the S&P 500 ETFs by more than 41 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.
We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind we’re going to take a glance at the recent hedge fund action encompassing SiteOne Landscape Supply, Inc. (NYSE:SITE).
What have hedge funds been doing with SiteOne Landscape Supply, Inc. (NYSE:SITE)?
At Q4’s end, a total of 15 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 7% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards SITE 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.
The largest stake in SiteOne Landscape Supply, Inc. (NYSE:SITE) was held by Greenhouse Funds, which reported holding $23.3 million worth of stock at the end of September. It was followed by D E Shaw with a $21.1 million position. Other investors bullish on the company included Balyasny Asset Management, Renaissance Technologies, and Citadel Investment Group. In terms of the portfolio weights assigned to each position Greenhouse Funds allocated the biggest weight to SiteOne Landscape Supply, Inc. (NYSE:SITE), around 4.26% of its 13F portfolio. Lionstone Capital Management is also relatively very bullish on the stock, earmarking 1.77 percent of its 13F equity portfolio to SITE.
As aggregate interest increased, specific money managers were breaking ground themselves. Renaissance Technologies, created the biggest position in SiteOne Landscape Supply, Inc. (NYSE:SITE). Renaissance Technologies had $13 million invested in the company at the end of the quarter. Noam Gottesman’s GLG Partners also made a $3.3 million investment in the stock during the quarter. The other funds with new positions in the stock are Steve Cohen’s Point72 Asset Management, Donald Sussman’s Paloma Partners, and Cliff Asness’s AQR Capital Management.
Let’s check out hedge fund activity in other stocks similar to SiteOne Landscape Supply, Inc. (NYSE:SITE). These stocks are AppFolio Inc (NASDAQ:APPF), ASGN Incorporated (NYSE:ASGN), SAGE Therapeutics Inc (NASDAQ:SAGE), and FibroGen Inc (NASDAQ:FGEN). All of these stocks’ market caps resemble SITE’s market cap.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 22.5 hedge funds with bullish positions and the average amount invested in these stocks was $260 million. That figure was $109 million in SITE’s case. SAGE Therapeutics Inc (NASDAQ:SAGE) is the most popular stock in this table. On the other hand AppFolio Inc (NASDAQ:APPF) is the least popular one with only 16 bullish hedge fund positions. Compared to these stocks SiteOne Landscape Supply, Inc. (NYSE:SITE) is even less popular than APPF. Hedge funds dodged a bullet by taking a bearish stance towards SITE. Our calculations showed that the top 20 most popular hedge fund stocks returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 17.4% in 2020 through March 25th but managed to beat the market by 5.5 percentage points. Unfortunately SITE wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); SITE investors were disappointed as the stock returned -23.8% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as most of these stocks already outperformed the market so far in Q1.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.