Last year we predicted the arrival of the first US recession since 2009 and we told in advance that the market will decline by at least 20% in (Recession is Imminent: We Need A Travel Ban NOW). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards Scorpio Tankers Inc. (NYSE:STNG).
Is Scorpio Tankers Inc. (NYSE:STNG) going to take off soon? Hedge funds were taking an optimistic view. The number of bullish hedge fund positions improved by 2 in recent months. Scorpio Tankers Inc. (NYSE:STNG) was in 20 hedge funds’ portfolios at the end of March. The all time high for this statistic is 33. Our calculations also showed that STNG isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).
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 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 S&P 500 ETFs by 115 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 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.
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, pet market is growing at a 7% annual rate and is expected to reach $110 billion in 2021. So, we are checking out the 5 best stocks for animal lovers. We go through lists like the 15 best Jim Cramer stocks to identify the next Tesla that will deliver outsized returns. 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. You can subscribe to our free daily newsletter on our homepage. With all of this in mind we’re going to analyze the recent hedge fund action regarding Scorpio Tankers Inc. (NYSE:STNG).
Do Hedge Funds Think STNG Is A Good Stock To Buy Now?
Heading into the second quarter of 2021, a total of 20 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 11% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards STNG over the last 23 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to Insider Monkey’s hedge fund database, Hosking Partners, managed by Jeremy Hosking, holds the largest position in Scorpio Tankers Inc. (NYSE:STNG). Hosking Partners has a $17.4 million position in the stock, comprising 0.4% of its 13F portfolio. Sitting at the No. 2 spot is Ken Griffin of Citadel Investment Group, with a $15.1 million position; less than 0.1%% of its 13F portfolio is allocated to the company. Remaining members of the smart money with similar optimism contain George McCabe’s Portolan Capital Management, Dmitry Balyasny’s Balyasny Asset Management and Michael Gelband’s ExodusPoint Capital. In terms of the portfolio weights assigned to each position Amitell Capital allocated the biggest weight to Scorpio Tankers Inc. (NYSE:STNG), around 1.95% of its 13F portfolio. Game Creek Capital is also relatively very bullish on the stock, setting aside 1.5 percent of its 13F equity portfolio to STNG.
Consequently, some big names were leading the bulls’ herd. Balyasny Asset Management, managed by Dmitry Balyasny, assembled the biggest position in Scorpio Tankers Inc. (NYSE:STNG). Balyasny Asset Management had $7.9 million invested in the company at the end of the quarter. Steve Cohen’s Point72 Asset Management also made a $3.9 million investment in the stock during the quarter. The other funds with new positions in the stock are Michael Burry’s Scion Asset Management, Gavin Saitowitz and Cisco J. del Valle’s Prelude Capital (previously Springbok Capital), and Sean Murphy’s Game Creek Capital.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Scorpio Tankers Inc. (NYSE:STNG) but similarly valued. We will take a look at American Finance Trust, Inc. (NASDAQ:AFIN), Rhythm Pharmaceuticals, Inc. (NASDAQ:RYTM), Cortexyme, Inc. (NASDAQ:CRTX), Coherus Biosciences Inc (NASDAQ:CHRS), Westport Fuel Systems Inc. (NASDAQ:WPRT), Apogee Enterprises, Inc. (NASDAQ:APOG), and Tactile Systems Technology, Inc. (NASDAQ:TCMD). All of these stocks’ market caps are similar to STNG’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 12 hedge funds with bullish positions and the average amount invested in these stocks was $74 million. That figure was $88 million in STNG’s case. Coherus Biosciences Inc (NASDAQ:CHRS) is the most popular stock in this table. On the other hand Cortexyme, Inc. (NASDAQ:CRTX) is the least popular one with only 3 bullish hedge fund positions. Scorpio Tankers Inc. (NYSE:STNG) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for STNG is 67.7. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 23.8% in 2021 through July 16th and beat the market again by 7.7 percentage points. Unfortunately STNG wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on STNG were disappointed as the stock returned -10.2% since the end of March (through 7/16) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.
Follow Scorpio Tankers Inc (NYSE:STNG)
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Disclosure: None. This article was originally published at Insider Monkey.