At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (see why hell is coming). We reversed our stance on March 25th after seeing unprecedented fiscal and monetary stimulus unleashed by the Fed and the Congress. This is the perfect market for stock pickers, now that the stocks are fully valued again. In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards Stifel Financial Corp. (NYSE:SF) at the end of the second quarter and determine whether the smart money was really smart about this stock.
Stifel Financial Corp. (NYSE:SF) was in 21 hedge funds’ portfolios at the end of June. The all time high for this statistics is 19. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. SF investors should pay attention to an increase in hedge fund interest lately. There were 17 hedge funds in our database with SF positions at the end of the first quarter. Our calculations also showed that SF 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According to most market participants, hedge funds are perceived as underperforming, outdated financial vehicles of years past. While there are greater than 8000 funds with their doors open at the moment, Our researchers look at the upper echelon of this club, about 850 funds. Most estimates calculate that this group of people control the majority of the hedge fund industry’s total capital, and by monitoring their best picks, Insider Monkey has revealed many investment strategies that have historically beaten Mr. Market. Insider Monkey’s flagship short hedge fund strategy exceeded the S&P 500 short ETFs by around 20 percentage points per annum 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 .
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost precious metals prices. So, we are checking out this junior gold mining stock. We are also checking out this lithium company which could benefit from the electric car adoption. 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. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website to get excerpts of these letters in your inbox. With all of this in mind let’s view the fresh hedge fund action surrounding Stifel Financial Corp. (NYSE:SF).
Hedge fund activity in Stifel Financial Corp. (NYSE:SF)
At the end of the second quarter, a total of 21 of the hedge funds tracked by Insider Monkey were long this stock, a change of 24% from the first quarter of 2020. The graph below displays the number of hedge funds with bullish position in SF over the last 20 quarters. With the smart money’s capital changing hands, there exists an “upper tier” of noteworthy hedge fund managers who were upping their stakes considerably (or already accumulated large positions).
More specifically, Fisher Asset Management was the largest shareholder of Stifel Financial Corp. (NYSE:SF), with a stake worth $58.2 million reported as of the end of September. Trailing Fisher Asset Management was AQR Capital Management, which amassed a stake valued at $27 million. Arrowstreet Capital, Azora Capital, and Citadel Investment Group 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 Billings Capital Management allocated the biggest weight to Stifel Financial Corp. (NYSE:SF), around 9.14% of its 13F portfolio. Azora Capital is also relatively very bullish on the stock, setting aside 2.68 percent of its 13F equity portfolio to SF.
As aggregate interest increased, specific money managers have jumped into Stifel Financial Corp. (NYSE:SF) headfirst. Azora Capital, managed by Ravi Chopra, assembled the biggest position in Stifel Financial Corp. (NYSE:SF). Azora Capital had $16.4 million invested in the company at the end of the quarter. Michael Gelband’s ExodusPoint Capital also made a $1.6 million investment in the stock during the quarter. The following funds were also among the new SF investors: Paul Tudor Jones’s Tudor Investment Corp, Paul Marshall and Ian Wace’s Marshall Wace LLP, and Donald Sussman’s Paloma Partners.
Let’s also examine hedge fund activity in other stocks similar to Stifel Financial Corp. (NYSE:SF). We will take a look at Ormat Technologies, Inc. (NYSE:ORA), Kirby Corporation (NYSE:KEX), The Hain Celestial Group, Inc. (NASDAQ:HAIN), KBR, Inc. (NYSE:KBR), BRF SA (NYSE:BRFS), Box, Inc. (NYSE:BOX), and Pinnacle Financial Partners, Inc. (NASDAQ:PNFP). This group of stocks’ market valuations match SF’s market valuation.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
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 $389 million. That figure was $158 million in SF’s case. KBR, Inc. (NYSE:KBR) is the most popular stock in this table. On the other hand Pinnacle Financial Partners, Inc. (NASDAQ:PNFP) is the least popular one with only 14 bullish hedge fund positions. Stifel Financial Corp. (NYSE:SF) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for SF is 55.7. 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. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. 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 24.8% in 2020 through the end of September and surpassed the market by 19.3 percentage points. Unfortunately SF wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); SF investors were disappointed as the stock returned 7% in the third 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 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
Disclosure: None. This article was originally published at Insider Monkey.