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). 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 South State Corporation (NASDAQ:SSB) at the end of the first quarter and determine whether the smart money was really smart about this stock.
South State Corporation (NASDAQ:SSB) investors should be aware of a decrease in support from the world’s most elite money managers recently. Our calculations also showed that SSB isn’t among the 30 most popular stocks among hedge funds (click for Q1 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.
In the eyes of most stock holders, hedge funds are assumed to be unimportant, outdated investment vehicles of yesteryear. While there are more than 8000 funds with their doors open today, Our researchers hone in on the elite of this club, around 850 funds. Most estimates calculate that this group of people administer the majority of the smart money’s total capital, and by paying attention to their best investments, Insider Monkey has brought to light a number of investment strategies that have historically surpassed the market. Insider Monkey’s flagship short hedge fund strategy defeated the S&P 500 short ETFs by around 20 percentage points annually since its inception in March 2017. Our portfolio of short stocks lost 36% since February 2017 (through May 18th) even though the market was up 30% during the same period. We just shared a list of 8 short targets in our latest quarterly update .
At Insider Monkey we scour multiple sources to uncover the next great investment idea. There is a lot of volatility in the markets and this presents amazing investment opportunities from time to time. For example, this trader claims to deliver juiced up returns with one trade a week, so we are checking out his highest conviction idea. A second trader claims to score lucrative profits by utilizing a “weekend trading strategy”, so we look into his strategy’s picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We recently recommended several stocks partly inspired by legendary Bill Miller’s investor letter. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. Now let’s analyze the fresh hedge fund action regarding South State Corporation (NASDAQ:SSB).
What have hedge funds been doing with South State Corporation (NASDAQ:SSB)?
At Q1’s end, a total of 12 of the hedge funds tracked by Insider Monkey were long this stock, a change of -20% from the fourth quarter of 2019. Below, you can check out the change in hedge fund sentiment towards SSB over the last 18 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Select Equity Group was the largest shareholder of South State Corporation (NASDAQ:SSB), with a stake worth $67.1 million reported as of the end of September. Trailing Select Equity Group was Basswood Capital, which amassed a stake valued at $3.1 million. Renaissance Technologies, Citadel Investment Group, and Mendon Capital Advisors were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Mendon Capital Advisors allocated the biggest weight to South State Corporation (NASDAQ:SSB), around 0.58% of its 13F portfolio. Select Equity Group is also relatively very bullish on the stock, designating 0.46 percent of its 13F equity portfolio to SSB.
Due to the fact that South State Corporation (NASDAQ:SSB) has experienced bearish sentiment from the smart money, it’s safe to say that there is a sect of hedge funds that decided to sell off their positions entirely by the end of the first quarter. It’s worth mentioning that Brandon Haley’s Holocene Advisors sold off the biggest stake of the “upper crust” of funds followed by Insider Monkey, comprising about $1.7 million in stock, and Israel Englander’s Millennium Management was right behind this move, as the fund sold off about $0.7 million worth. These transactions are intriguing to say the least, as total hedge fund interest fell by 3 funds by the end of the first quarter.
Let’s go over hedge fund activity in other stocks similar to South State Corporation (NASDAQ:SSB). These stocks are Alamos Gold Inc (NYSE:AGI), Washington Real Estate Investment Trust (NYSE:WRE), Synaptics Incorporated (NASDAQ:SYNA), and Coca-Cola Consolidated Inc. (NASDAQ:COKE). This group of stocks’ market valuations match SSB’s market valuation.
|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 14.75 hedge funds with bullish positions and the average amount invested in these stocks was $171 million. That figure was $77 million in SSB’s case. Synaptics Incorporated (NASDAQ:SYNA) is the most popular stock in this table. On the other hand Washington Real Estate Investment Trust (NYSE:WRE) is the least popular one with only 5 bullish hedge fund positions. South State Corporation (NASDAQ:SSB) 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 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 12.3% in 2020 through June 30th and surpassed the market by 15.5 percentage points. Unfortunately SSB wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); SSB investors were disappointed as the stock returned -18.1% during the second 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.
Disclosure: None. This article was originally published at Insider Monkey.