Hedge Funds Aren’t Crazy About Standex Int’l Corp. (SXI) Anymore

During the first half of the fourth quarter the Russell 2000 ETF (IWM) lagged the larger S&P 500 ETF (SPY) by about 4 percentage points as investors worried over the possible ramifications of rising interest rates. The hedge funds and institutional investors we track typically invest more in smaller-cap stocks than an average investor (i.e. only 298 S&P 500 constituents were among the 500 most popular stocks among hedge funds), and we have seen data that shows those funds paring back their overall exposure. Those funds cutting positions in small-caps is one reason why volatility has increased. In the following paragraphs, we take a closer look at what hedge funds and prominent investors think of Standex Int’l Corp. (NYSE:SXI) and see how the stock is affected by the recent hedge fund activity.

Is Standex Int’l Corp. (NYSE:SXI) a healthy stock for your portfolio? The best stock pickers are in a pessimistic mood. The number of long hedge fund bets shrunk by 3 in recent months. Our calculations also showed that sxi isn’t among the 30 most popular stocks among hedge funds.

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the market by 18 percentage points since May 2014 through December 3, 2018 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.

Mario Gabelli

We’re going to take a look at the fresh hedge fund action surrounding Standex Int’l Corp. (NYSE:SXI).

What does the smart money think about Standex Int’l Corp. (NYSE:SXI)?

At Q3’s end, a total of 12 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -20% from the second quarter of 2018. Below, you can check out the change in hedge fund sentiment towards SXI over the last 13 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

No of Hedge Funds with SXI Positions

The largest stake in Standex Int’l Corp. (NYSE:SXI) was held by GAMCO Investors, which reported holding $6.6 million worth of stock at the end of September. It was followed by Millennium Management with a $4.9 million position. Other investors bullish on the company included Royce & Associates, AQR Capital Management, and Renaissance Technologies.

Because Standex Int’l Corp. (NYSE:SXI) has faced bearish sentiment from hedge fund managers, logic holds that there exists a select few hedgies that slashed their full holdings in the third quarter. At the top of the heap, Roger Ibbotson’s Zebra Capital Management sold off the biggest investment of all the hedgies watched by Insider Monkey, valued at an estimated $0.5 million in stock, and Dmitry Balyasny’s Balyasny Asset Management was right behind this move, as the fund dropped about $0.3 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest fell by 3 funds in the third quarter.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Standex Int’l Corp. (NYSE:SXI) but similarly valued. We will take a look at W&T Offshore, Inc. (NYSE:WTI), BrightSphere Investment Group plc (NYSE:BSIG), Casella Waste Systems Inc. (NASDAQ:CWST), and Engility Holdings Inc (NYSE:EGL). This group of stocks’ market valuations are closest to SXI’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
WTI 17 152116 0
BSIG 22 140776 4
CWST 16 177698 1
EGL 17 61929 6
Average 18 133130 2.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 18 hedge funds with bullish positions and the average amount invested in these stocks was $133 million. That figure was $25 million in SXI’s case. BrightSphere Investment Group plc (NYSE:BSIG) is the most popular stock in this table. On the other hand Casella Waste Systems Inc. (NASDAQ:CWST) is the least popular one with only 16 bullish hedge fund positions. Compared to these stocks Standex Int’l Corp. (NYSE:SXI) is even less popular than CWST. Considering that hedge funds aren’t fond of this stock in relation to other companies analyzed 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.

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