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Hedge Funds Are Buying Sculptor Capital Management, Inc. (SCU)

Does Sculptor Capital Management, Inc. (NYSE:SCU) represent a good buying opportunity at the moment? Let’s quickly check the hedge fund interest towards the company. Hedge fund firms constantly search out bright intellectuals and highly-experienced employees and throw away millions of dollars on satellite photos and other research activities, so it is no wonder why they tend to generate millions in profits each year. It is also true that some hedge fund players fail inconceivably on some occasions, but net net their stock picks have been generating superior risk-adjusted returns on average over the years.

Is Sculptor Capital Management, Inc. (NYSE:SCU) worth your attention right now? Money managers are turning bullish. The number of bullish hedge fund bets improved by 1 recently. Our calculations also showed that SCU isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

In the financial world there are many indicators shareholders use to grade their holdings. A duo of the less known indicators are hedge fund and insider trading moves. Our researchers have shown that, historically, those who follow the best picks of the top fund managers can trounce their index-focused peers by a very impressive margin (see the details here).

Crispin Odey of Odey Asset Management Group

We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. 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 also rely on the best performing hedge funds‘ buy/sell signals. We’re going to analyze the fresh hedge fund action encompassing Sculptor Capital Management, Inc. (NYSE:SCU).

What does smart money think about Sculptor Capital Management, Inc. (NYSE:SCU)?

At the end of the third quarter, a total of 11 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 10% from the second quarter of 2019. By comparison, 9 hedge funds held shares or bullish call options in SCU a year ago. With the smart money’s capital changing hands, there exists an “upper tier” of noteworthy hedge fund managers who were boosting their holdings substantially (or already accumulated large positions).

The largest stake in Sculptor Capital Management, Inc. (NYSE:SCU) was held by Abrams Capital Management, which reported holding $43.3 million worth of stock at the end of September. It was followed by Odey Asset Management Group with a $9.9 million position. Other investors bullish on the company included Miller Value Partners, North Run Capital, and Kamunting Street Capital. In terms of the portfolio weights assigned to each position North Run Capital allocated the biggest weight to Sculptor Capital Management, Inc. (NYSE:SCU), around 1.94% of its 13F portfolio. Kamunting Street Capital is also relatively very bullish on the stock, setting aside 1.76 percent of its 13F equity portfolio to SCU.

Consequently, key money managers have been driving this bullishness. QVT Financial, managed by Daniel Gold, initiated the most outsized position in Sculptor Capital Management, Inc. (NYSE:SCU). QVT Financial had $1.5 million invested in the company at the end of the quarter. Robert B. Gillam’s McKinley Capital Management also initiated a $0.3 million position during the quarter.

Let’s also examine hedge fund activity in other stocks similar to Sculptor Capital Management, Inc. (NYSE:SCU). We will take a look at Ferro Corporation (NYSE:FOE), Mr. Cooper Group Inc. (NASDAQ:COOP), ACCO Brands Corporation (NYSE:ACCO), and HeadHunter Group PLC (NASDAQ:HHR). This group of stocks’ market caps resemble SCU’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
FOE 16 131293 2
COOP 24 285179 1
ACCO 19 54847 3
HHR 8 73959 -4
Average 16.75 136320 0.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 16.75 hedge funds with bullish positions and the average amount invested in these stocks was $136 million. That figure was $66 million in SCU’s case. Mr. Cooper Group Inc. (NASDAQ:COOP) is the most popular stock in this table. On the other hand HeadHunter Group PLC (NASDAQ:HHR) is the least popular one with only 8 bullish hedge fund positions. Sculptor Capital Management, Inc. (NYSE:SCU) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. 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. Unfortunately SCU wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); SCU investors were disappointed as the stock returned -0.3% during the first two months of the fourth quarter 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 70 percent of these stocks already outperformed the market in Q4.

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

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