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Hedge Funds Dipping Their Toes Back Into Steel Dynamics, Inc. (STLD)

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 823 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of June 30th, when the S&P 500 Index was trading around the 3100 level. Stocks kept going up since then. In this article we look at how hedge funds traded Steel Dynamics, Inc. (NASDAQ:STLD) and determine whether the smart money was really smart about this stock.

Steel Dynamics, Inc. (NASDAQ:STLD) has seen an increase in support from the world’s most elite money managers lately. Steel Dynamics, Inc. (NASDAQ:STLD) was in 30 hedge funds’ portfolios at the end of June. The all time high for this statistics is 42. There were 27 hedge funds in our database with STLD positions at the end of the first quarter. Our calculations also showed that STLD 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According to most investors, hedge funds are assumed to be slow, outdated financial vehicles of years past. While there are more than 8000 funds in operation today, Our researchers hone in on the aristocrats of this group, around 850 funds. These hedge fund managers shepherd most of the hedge fund industry’s total capital, and by tracking their top picks, Insider Monkey has formulated several investment strategies that have historically surpassed the broader indices. Insider Monkey’s flagship short hedge fund strategy outperformed the S&P 500 short ETFs by around 20 percentage points annually 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 .

BRIDGEWATER ASSOCIATES

Ray Dalio of Bridgewater Associates

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, this “mom” trader turned $2000 into $2 million within 2 years. So, we are checking out her best trade idea of the month. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. 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. Keeping this in mind let’s take a look at the recent hedge fund action surrounding Steel Dynamics, Inc. (NASDAQ:STLD).

How have hedgies been trading Steel Dynamics, Inc. (NASDAQ:STLD)?

At second quarter’s end, a total of 30 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 11% from the previous quarter. On the other hand, there were a total of 31 hedge funds with a bullish position in STLD a year ago. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, D E Shaw was the largest shareholder of Steel Dynamics, Inc. (NASDAQ:STLD), with a stake worth $120.6 million reported as of the end of September. Trailing D E Shaw was AQR Capital Management, which amassed a stake valued at $86.9 million. Renaissance Technologies, Arrowstreet Capital, and Millennium Management 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 Sciencast Management allocated the biggest weight to Steel Dynamics, Inc. (NASDAQ:STLD), around 0.22% of its 13F portfolio. Weld Capital Management is also relatively very bullish on the stock, dishing out 0.2 percent of its 13F equity portfolio to STLD.

As aggregate interest increased, key money managers were leading the bulls’ herd. ExodusPoint Capital, managed by Michael Gelband, established the largest position in Steel Dynamics, Inc. (NASDAQ:STLD). ExodusPoint Capital had $2.4 million invested in the company at the end of the quarter. Paul Tudor Jones’s Tudor Investment Corp also made a $1.1 million investment in the stock during the quarter. The other funds with new positions in the stock are Ray Dalio’s Bridgewater Associates, Donald Sussman’s Paloma Partners, and Qing Li’s Sciencast Management.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Steel Dynamics, Inc. (NASDAQ:STLD) but similarly valued. We will take a look at CACI International Inc (NYSE:CACI), Pearson PLC (NYSE:PSO), Arrow Electronics, Inc. (NYSE:ARW), Quanta Services Inc (NYSE:PWR), BWX Technologies Inc (NYSE:BWXT), Reinsurance Group of America Inc (NYSE:RGA), and Douglas Emmett, Inc. (NYSE:DEI). This group of stocks’ market caps are similar to STLD’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
CACI 34 395916 9
PSO 7 14870 -1
ARW 29 531930 6
PWR 31 624315 3
BWXT 27 141453 3
RGA 33 240555 3
DEI 27 699337 5
Average 26.9 378339 4

View table here if you experience formatting issues.

As you can see these stocks had an average of 26.9 hedge funds with bullish positions and the average amount invested in these stocks was $378 million. That figure was $370 million in STLD’s case. CACI International Inc (NYSE:CACI) is the most popular stock in this table. On the other hand Pearson PLC (NYSE:PSO) is the least popular one with only 7 bullish hedge fund positions. Steel Dynamics, Inc. (NASDAQ:STLD) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for STLD is 72. 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. 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 23.8% in 2020 through September 14th and still beat the market by 17.6 percentage points. Hedge funds were also right about betting on STLD as the stock returned 15.3% during Q3 (through September 14th) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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