Hedge Funds Are Dumping State Street Corporation (STT)

Insider Monkey finished processing more than 700 13F filings made by hedge funds and prominent investors. These filings show these funds’ portfolio positions as of September 30. What do these smart investors think about State Street Corporation (NYSE:STT)?

State Street Corporation (NYSE:STT) investors should be aware of a decrease in hedge fund sentiment lately. At the end of this article we will also compare STT to other stocks, including Equity Residential (NYSE:EQR), Yahoo! Inc. (NASDAQ:YHOO), and Johnson Controls, Inc. (NYSE:JCI) to get a better sense of its popularity.

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In the eyes of most investors, hedge funds are seen as unimportant, old investment vehicles of years past. While there are over 8000 funds in operation at the moment, Our researchers look at the crème de la crème of this group, approximately 700 funds. These investment experts oversee bulk of the hedge fund industry’s total asset base, and by following their top investments, Insider Monkey has uncovered a few investment strategies that have historically outstripped the market. Insider Monkey’s small-cap hedge fund strategy outrun the S&P 500 index by 12 percentage points a year for a decade in their back tests.

With all of this in mind, we’re going to take a peek at the recent action surrounding State Street Corporation (NYSE:STT).

Hedge fund activity in State Street Corporation (NYSE:STT)

At Q3’s end, a total of 24 of the hedge funds tracked by Insider Monkey were long this stock, a change of -20% from the previous quarter. With the smart money’s sentiment swirling, there exists a few notable hedge fund managers who were increasing their stakes substantially (or already accumulated large positions).

According to Insider Monkey’s hedge fund database, Richard S. Pzena’s Pzena Investment Management has the most valuable position in State Street Corporation (NYSE:STT), worth close to $218.8 million, amounting to 1.4% of its total 13F portfolio. Sitting at the No. 2 spot is Yacktman Asset Management, managed by Donald Yacktman, which holds a $130.6 million position; the fund has 0.9% of its 13F portfolio invested in the stock. Remaining professional money managers that are bullish include Mario Gabelli’s GAMCO Investors, Thomas Steyer’s Farallon Capital and Daniel Bubis’ Tetrem Capital Management.

Judging by the fact that State Street Corporation (NYSE:STT) has faced falling interest from hedge fund managers, we can see that there is a sect of fund managers that elected to cut their full holdings last quarter. Intriguingly, Chao Ku’s Nine Chapters Capital Management cut the biggest stake of the 700 funds tracked by Insider Monkey, comprising an estimated $14.1 million in stock. Gregg Moskowitz’s fund, Interval Partners, also said goodbye to its stock, about $2.4 million worth. These transactions are interesting, as aggregate hedge fund interest fell by 6 funds last quarter.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as State Street Corporation (NYSE:STT) but similarly valued. These stocks are Equity Residential (NYSE:EQR), Yahoo! Inc. (NASDAQ:YHOO), Johnson Controls, Inc. (NYSE:JCI), and DISH Network Corp. (NASDAQ:DISH). All of these stocks’ market caps resemble STT’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
EQR 24 684438 -4
YHOO 89 5470192 -15
JCI 32 478236 -9
DISH 53 3089941 -15

As you can see these stocks had an average of 50 hedge funds with bullish positions and the average amount invested in these stocks was $2.43 billion. That figure was $748 million in STT’s case. Yahoo! Inc. (NASDAQ:YHOO) is the most popular stock in this table, while Equity Residential (NYSE:EQR) is the least popular one with only 24 bullish hedge fund positions. Compared to these stocks State Street Corporation (NYSE:STT) is even less popular than EQR. Considering that hedge funds aren’t fond of this stock in relation to other companies mentioned in this article, it may be a good idea to analyze it in detail and understand why the smart money isn’t behind this stock. This isn’t necessarily bad news. Although it is possible that hedge funds may think the stock is overpriced and view the stock as a short candidate, they may not be very familiar with the bullish thesis. In either case more research is warranted.