Concerns over rising interest rates and expected further rate increases have hit several stocks hard during the fourth quarter of 2018. Trends reversed 180 degrees in 2019 amid Powell’s pivot and optimistic expectations towards a trade deal with China. Hedge funds and institutional investors tracked by Insider Monkey usually invest a disproportionate amount of their portfolios in smaller cap stocks. We have been receiving indications that hedge funds were increasing their overall exposure in the third quarter and this is one of the factors behind the recent movements in major indices. In this article, we will take a closer look at hedge fund sentiment towards Store Capital Corporation (NYSE:STOR).
Store Capital Corporation (NYSE:STOR) investors should be aware of a decrease in activity from the world’s largest hedge funds lately. Our calculations also showed that STOR isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
Video: Click the image to 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 hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (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 27.8% through November 21, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Warren Buffett of Berkshire Hathaway
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds‘ buy/sell signals. We’re going to take a peek at the latest hedge fund action encompassing Store Capital Corporation (NYSE:STOR).
How have hedgies been trading Store Capital Corporation (NYSE:STOR)?
Heading into the fourth quarter of 2019, a total of 18 of the hedge funds tracked by Insider Monkey were long this stock, a change of -18% from the second quarter of 2019. On the other hand, there were a total of 19 hedge funds with a bullish position in STOR a year ago. With the smart money’s capital changing hands, there exists a few notable hedge fund managers who were upping their holdings meaningfully (or already accumulated large positions).
The largest stake in Store Capital Corporation (NYSE:STOR) was held by Berkshire Hathaway, which reported holding $696.6 million worth of stock at the end of September. It was followed by Citadel Investment Group with a $85 million position. Other investors bullish on the company included Renaissance Technologies, Two Sigma Advisors, and Hudson Executive Capital. In terms of the portfolio weights assigned to each position Claar Advisors allocated the biggest weight to Store Capital Corporation (NYSE:STOR), around 3.97% of its 13F portfolio. Hudson Executive Capital is also relatively very bullish on the stock, dishing out 2.52 percent of its 13F equity portfolio to STOR.
Seeing as Store Capital Corporation (NYSE:STOR) has faced declining sentiment from hedge fund managers, logic holds that there was a specific group of hedge funds that decided to sell off their full holdings last quarter. At the top of the heap, Jeffrey Furber’s AEW Capital Management dropped the largest stake of the “upper crust” of funds followed by Insider Monkey, comprising about $96.1 million in stock. Clint Carlson’s fund, Carlson Capital, also dumped its stock, about $18.7 million worth. These transactions are intriguing to say the least, as total hedge fund interest fell by 4 funds last quarter.
Let’s now take a look at hedge fund activity in other stocks similar to Store Capital Corporation (NYSE:STOR). We will take a look at Snap-on Incorporated (NYSE:SNA), Guidewire Software Inc (NYSE:GWRE), Cypress Semiconductor Corporation (NASDAQ:CY), and Juniper Networks, Inc. (NYSE:JNPR). This group of stocks’ market caps resemble STOR’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| SNA | 24 | 487528 | -1 |
| GWRE | 22 | 836569 | 0 |
| CY | 34 | 1456562 | -2 |
| JNPR | 30 | 637184 | 2 |
| Average | 27.5 | 854461 | -0.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 27.5 hedge funds with bullish positions and the average amount invested in these stocks was $854 million. That figure was $979 million in STOR’s case. Cypress Semiconductor Corporation (NASDAQ:CY) is the most popular stock in this table. On the other hand Guidewire Software Inc (NYSE:GWRE) is the least popular one with only 22 bullish hedge fund positions. Compared to these stocks Store Capital Corporation (NYSE:STOR) is even less popular than GWRE. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. A small number of hedge funds were also right about betting on STOR, though not to the same extent, as the stock returned 8.8% during the fourth quarter (through 11/30) and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.
