Hedge Funds Are Souring On SiteOne Landscape Supply, Inc. (SITE)

At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (see why hell is coming). We reversed our stance on March 25th after seeing unprecedented fiscal and monetary stimulus unleashed by the Fed and the Congress. This is the perfect market for stock pickers, now that the stocks are fully valued again. 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 SiteOne Landscape Supply, Inc. (NYSE:SITE) at the end of the second quarter and determine whether the smart money was really smart about this stock.

Is SiteOne Landscape Supply, Inc. (NYSE:SITE) a worthy stock to buy now? Prominent investors were cutting their exposure. The number of bullish hedge fund bets retreated by 1 recently. SiteOne Landscape Supply, Inc. (NYSE:SITE) was in 18 hedge funds’ portfolios at the end of the second quarter of 2020. The all time high for this statistics is 19. Our calculations also showed that SITE isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings and see the video for a quick look at the top 5 stocks).

Video: Watch our video about the top 5 most popular hedge fund stocks.

According to most shareholders, hedge funds are assumed to be slow, outdated investment tools of years past. While there are greater than 8000 funds with their doors open at present, Our experts choose to focus on the masters of this club, around 850 funds. These money managers shepherd the majority of the hedge fund industry’s total asset base, and by observing their unrivaled picks, Insider Monkey has discovered a number of investment strategies that have historically surpassed the broader indices. Insider Monkey’s flagship short hedge fund strategy exceeded the S&P 500 short ETFs by around 20 percentage points a year since its inception in March 2017. Our portfolio of short stocks lost 34% since February 2017 (through August 17th) even though the market was up 53% during the same period. We just shared a list of 8 short targets in our latest quarterly update .

Chuck Royce

Chuck Royce of Royce & Associates

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we are checking out this junior gold mining stock and we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. 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 website to get excerpts of these letters in your inbox. Now let’s take a glance at the recent hedge fund action encompassing SiteOne Landscape Supply, Inc. (NYSE:SITE).

How are hedge funds trading SiteOne Landscape Supply, Inc. (NYSE:SITE)?

At the end of the second quarter, a total of 18 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -5% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in SITE over the last 20 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, D E Shaw, managed by D. E. Shaw, holds the biggest position in SiteOne Landscape Supply, Inc. (NYSE:SITE). D E Shaw has a $22.6 million position in the stock, comprising less than 0.1%% of its 13F portfolio. The second largest stake is held by Greenhouse Funds, led by Joe Milano, holding a $16.1 million position; 2.4% of its 13F portfolio is allocated to the stock. Other hedge funds and institutional investors with similar optimism encompass Peter Muller’s PDT Partners, John Overdeck and David Siegel’s Two Sigma Advisors and Chuck Royce’s Royce & Associates. In terms of the portfolio weights assigned to each position Greenhouse Funds allocated the biggest weight to SiteOne Landscape Supply, Inc. (NYSE:SITE), around 2.4% of its 13F portfolio. PDT Partners is also relatively very bullish on the stock, setting aside 0.46 percent of its 13F equity portfolio to SITE.

Since SiteOne Landscape Supply, Inc. (NYSE:SITE) has faced falling interest from hedge fund managers, we can see that there exists a select few money managers that elected to cut their full holdings in the second quarter. Intriguingly, Renaissance Technologies cut the biggest investment of the “upper crust” of funds watched by Insider Monkey, valued at about $11.4 million in stock. Noam Gottesman’s fund, GLG Partners, also cut its stock, about $3.9 million worth. These transactions are interesting, as aggregate hedge fund interest dropped by 1 funds in the second quarter.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as SiteOne Landscape Supply, Inc. (NYSE:SITE) but similarly valued. We will take a look at Helen of Troy Limited (NASDAQ:HELE), National Oilwell Varco, Inc. (NYSE:NOV), Everbridge, Inc. (NASDAQ:EVBG), The Mosaic Company (NYSE:MOS), Kemper Corporation (NYSE:KMPR), Owl Rock Capital Corporation (NYSE:ORCC), and New York Community Bancorp, Inc. (NYSE:NYCB). This group of stocks’ market values are similar to SITE’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
HELE 13 152121 -3
NOV 30 621557 1
EVBG 43 1161901 12
MOS 32 450160 3
KMPR 16 37427 3
ORCC 15 136062 4
NYCB 28 221363 6
Average 25.3 397227 3.7

View table here if you experience formatting issues.

As you can see these stocks had an average of 25.3 hedge funds with bullish positions and the average amount invested in these stocks was $397 million. That figure was $63 million in SITE’s case. Everbridge, Inc. (NASDAQ:EVBG) is the most popular stock in this table. On the other hand Helen of Troy Limited (NASDAQ:HELE) is the least popular one with only 13 bullish hedge fund positions. SiteOne Landscape Supply, Inc. (NYSE:SITE) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for SITE is 40.8. 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 negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 24.8% in 2020 through the end of September and surpassed the market by 19.3 percentage points. Unfortunately SITE wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); SITE investors were disappointed as the stock returned 7% in the third 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 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.

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