We are still in an overall bull market and many stocks that smart money investors were piling into surged through the end of November. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 54% and 51% respectively. Hedge funds’ top 3 stock picks returned 41.7% this year and beat the S&P 500 ETFs by 14 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like SIFCO Industries, Inc. (NYSE:SIF).
SIFCO Industries, Inc. (NYSE:SIF) shareholders have witnessed an increase in activity from the world’s largest hedge funds lately. Our calculations also showed that SIF 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.
Jeffrey Bronchick of Cove Street Capital
We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. 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 even check out this option genius’ weekly trade ideas. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager’s investor letter and the stock already gained 20 percent. With all of this in mind let’s take a look at the key hedge fund action regarding SIFCO Industries, Inc. (NYSE:SIF).
How are hedge funds trading SIFCO Industries, Inc. (NYSE:SIF)?
Heading into the fourth quarter of 2019, a total of 5 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 25% from the previous quarter. The graph below displays the number of hedge funds with bullish position in SIF over the last 17 quarters. With the smart money’s positions undergoing their usual ebb and flow, there exists a select group of noteworthy hedge fund managers who were boosting their stakes considerably (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Cove Street Capital, managed by Jeffrey Bronchick, holds the number one position in SIFCO Industries, Inc. (NYSE:SIF). Cove Street Capital has a $0.7 million position in the stock, comprising 0.1% of its 13F portfolio. Sitting at the No. 2 spot is Minerva Advisors, led by David P. Cohen, holding a $0.6 million position; 0.3% of its 13F portfolio is allocated to the stock. Some other hedge funds and institutional investors that hold long positions comprise Chuck Royce’s Royce & Associates and Ken Griffin’s Citadel Investment Group. In terms of the portfolio weights assigned to each position Minerva Advisors allocated the biggest weight to SIFCO Industries, Inc. (NYSE:SIF), around 0.31% of its 13F portfolio. Cove Street Capital is also relatively very bullish on the stock, designating 0.09 percent of its 13F equity portfolio to SIF.
With a general bullishness amongst the heavyweights, key money managers have jumped into SIFCO Industries, Inc. (NYSE:SIF) headfirst. Citadel Investment Group, managed by Ken Griffin, created the biggest position in SIFCO Industries, Inc. (NYSE:SIF). Citadel Investment Group had $0 million invested in the company at the end of the quarter.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as SIFCO Industries, Inc. (NYSE:SIF) but similarly valued. We will take a look at American Shared Hospital Services (NYSE:AMS), CYANOTECH CORP (NASDAQ:CYAN), Comstock Holding Companies, Inc. (NASDAQ:CHCI), and NovaBay Pharmaceuticals, Inc. (NYSE:NBY). All of these stocks’ market caps are closest to SIF’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| AMS | 1 | 41 | 0 |
| CYAN | 1 | 358 | -1 |
| CHCI | 1 | 177 | -1 |
| NBY | 2 | 224 | 1 |
| Average | 1.25 | 200 | -0.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 1.25 hedge funds with bullish positions and the average amount invested in these stocks was $0 million. That figure was $2 million in SIF’s case. NovaBay Pharmaceuticals, Inc. (NYSE:NBY) is the most popular stock in this table. On the other hand American Shared Hospital Services (NYSE:AMS) is the least popular one with only 1 bullish hedge fund positions. Compared to these stocks SIFCO Industries, Inc. (NYSE:SIF) is more popular among hedge funds. 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. Unfortunately SIF wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on SIF were disappointed as the stock returned -4.1% during the first two months of the fourth 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 20 most popular stocks among hedge funds as 70 percent of these stocks already outperformed the market in Q4.
Disclosure: None. This article was originally published at Insider Monkey.