We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (see why hell is coming).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. Out of thousands of stocks that are currently traded on the market, it is difficult to identify those that will really generate strong returns. Hedge funds and institutional investors spend millions of dollars on analysts with MBAs and PhDs, who are industry experts and well connected to other industry and media insiders on top of that. Individual investors can piggyback the hedge funds employing these talents and can benefit from their vast resources and knowledge in that way. We analyze quarterly 13F filings of nearly 835 hedge funds and, by looking at the smart money sentiment that surrounds a stock, we can determine whether it has the potential to beat the market over the long-term. Therefore, let’s take a closer look at what smart money thinks about Simpson Manufacturing Co, Inc. (NYSE:SSD).
Simpson Manufacturing Co, Inc. (NYSE:SSD) has seen an increase in activity from the world’s largest hedge funds recently. Our calculations also showed that SSD isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).
In today’s marketplace there are plenty of methods stock market investors have at their disposal to assess their holdings. A pair of the most innovative methods are hedge fund and insider trading activity. Our experts have shown that, historically, those who follow the best picks of the best investment managers can beat the market by a superb margin (see the details here).
Ken Fisher of Fisher Asset Management
We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind we’re going to go over the new hedge fund action regarding Simpson Manufacturing Co, Inc. (NYSE:SSD).
How are hedge funds trading Simpson Manufacturing Co, Inc. (NYSE:SSD)?
At the end of the fourth quarter, a total of 24 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 60% from the third quarter of 2019. On the other hand, there were a total of 17 hedge funds with a bullish position in SSD a year ago. With hedgies’ capital changing hands, there exists a few notable hedge fund managers who were upping their holdings considerably (or already accumulated large positions).
Among these funds, Ariel Investments held the most valuable stake in Simpson Manufacturing Co, Inc. (NYSE:SSD), which was worth $103.6 million at the end of the third quarter. On the second spot was Arrowstreet Capital which amassed $55.2 million worth of shares. Royce & Associates, Fisher Asset Management, 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 Ariel Investments allocated the biggest weight to Simpson Manufacturing Co, Inc. (NYSE:SSD), around 1.3% of its 13F portfolio. Royce & Associates is also relatively very bullish on the stock, earmarking 0.39 percent of its 13F equity portfolio to SSD.
As one would reasonably expect, key money managers were breaking ground themselves. Millennium Management, managed by Israel Englander, initiated the most valuable position in Simpson Manufacturing Co, Inc. (NYSE:SSD). Millennium Management had $11.8 million invested in the company at the end of the quarter. Renaissance Technologies also initiated a $8.7 million position during the quarter. The other funds with new positions in the stock are John Overdeck and David Siegel’s Two Sigma Advisors, Joel Greenblatt’s Gotham Asset Management, and Dmitry Balyasny’s Balyasny Asset Management.
Let’s now take a look at hedge fund activity in other stocks similar to Simpson Manufacturing Co, Inc. (NYSE:SSD). We will take a look at White Mountains Insurance Group Ltd (NYSE:WTM), BlackBerry Limited (NYSE:BB), Liberty Latin America Ltd. (NASDAQ:LILAK), and Cameco Corporation (NYSE:CCJ). This group of stocks’ market values match SSD’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| WTM | 16 | 163990 | -1 |
| BB | 27 | 470870 | -3 |
| LILAK | 21 | 443479 | -1 |
| CCJ | 28 | 329012 | 3 |
| Average | 23 | 351838 | -0.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 23 hedge funds with bullish positions and the average amount invested in these stocks was $352 million. That figure was $284 million in SSD’s case. Cameco Corporation (NYSE:CCJ) is the most popular stock in this table. On the other hand White Mountains Insurance Group Ltd (NYSE:WTM) is the least popular one with only 16 bullish hedge fund positions. Simpson Manufacturing Co, Inc. (NYSE:SSD) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 17.4% in 2020 through March 25th but beat the market by 5.5 percentage points. Unfortunately SSD wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on SSD were disappointed as the stock returned -31.2% during the same time period 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 many of these stocks already outperformed the market so far this year.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
