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 (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 Seaboard Corporation (NYSE:SEB).
Seaboard Corporation (NYSE:SEB) investors should be aware of a decrease in activity from the world’s largest hedge funds lately. Our calculations also showed that SEB 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.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 58 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, we take a look at lists like the 10 easiest remote jobs that pay well to identify emerging trends that are likely to lead to 1000% gains in the coming years. We interview hedge fund managers and ask them about their best ideas. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. For example we are checking out stocks recommended/scorned by legendary Bill Miller. 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. With all of this in mind we’re going to analyze the latest hedge fund action encompassing Seaboard Corporation (NYSE:SEB).
How are hedge funds trading Seaboard Corporation (NYSE:SEB)?
At Q1’s end, a total of 15 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -17% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards SEB over the last 18 quarters. With the smart money’s positions undergoing their usual ebb and flow, there exists an “upper tier” of notable hedge fund managers who were boosting their stakes meaningfully (or already accumulated large positions).
Of the funds tracked by Insider Monkey, Irving Kahn (founder)’s Kahn Brothers has the biggest position in Seaboard Corporation (NYSE:SEB), worth close to $35.7 million, accounting for 6.5% of its total 13F portfolio. Coming in second is Renaissance Technologies, which holds a $20.6 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Other members of the smart money with similar optimism consist of George Baxter’s Sabrepoint Capital, Ric Dillon’s Diamond Hill Capital and Vadim Rubinchik’s Brightlight Capital. In terms of the portfolio weights assigned to each position Sabrepoint Capital allocated the biggest weight to Seaboard Corporation (NYSE:SEB), around 7.63% of its 13F portfolio. Kahn Brothers is also relatively very bullish on the stock, setting aside 6.54 percent of its 13F equity portfolio to SEB.
Seeing as Seaboard Corporation (NYSE:SEB) has witnessed falling interest from hedge fund managers, logic holds that there is a sect of funds who sold off their positions entirely in the first quarter. At the top of the heap, Ryan Tolkin (CIO)’s Schonfeld Strategic Advisors said goodbye to the largest position of the 750 funds monitored by Insider Monkey, totaling an estimated $5.1 million in stock, and Brian C. Freckmann’s Lyon Street Capital was right behind this move, as the fund sold off about $0.9 million worth. These moves are intriguing to say the least, as total hedge fund interest dropped by 3 funds in the first quarter.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Seaboard Corporation (NYSE:SEB) but similarly valued. We will take a look at Littelfuse, Inc. (NASDAQ:LFUS), Globant SA (NYSE:GLOB), Axis Capital Holdings Limited (NYSE:AXS), and Cyberark Software Ltd (NASDAQ:CYBR). This group of stocks’ market caps are closest to SEB’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 21.25 hedge funds with bullish positions and the average amount invested in these stocks was $257 million. That figure was $109 million in SEB’s case. Axis Capital Holdings Limited (NYSE:AXS) is the most popular stock in this table. On the other hand Cyberark Software Ltd (NASDAQ:CYBR) is the least popular one with only 14 bullish hedge fund positions. Seaboard Corporation (NYSE:SEB) 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 13.3% in 2020 through June 25th and surpassed the market by 16.8 percentage points. Unfortunately SEB wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); SEB investors were disappointed as the stock returned 5.8% 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.