While the market driven by short-term sentiment influenced by the accomodative interest rate environment in the US, increasing oil prices and deteriorating expectations towards the resolution of the trade war with China, many smart money investors kept their cautious approach regarding the current bull run in the third quarter and hedging or reducing many of their long positions. Some fund managers are betting on Dow hitting 40,000 to generate strong returns. However, as we know, big investors usually buy stocks with strong fundamentals that can deliver gains both in bull and bear markets, which is why we believe we can profit from imitating them. In this article, we are going to take a look at the smart money sentiment surrounding Suzano S.A. (NYSE:SUZ).
Is Suzano S.A. (NYSE:SUZ) a superb investment right now? The smart money is buying. The number of long hedge fund positions advanced by 2 in recent months. Our calculations also showed that SUZ isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). SUZ was in 4 hedge funds’ portfolios at the end of September. There were 2 hedge funds in our database with SUZ holdings at the end of the previous quarter.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. 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.
Cliff Asness of AQR Capital Management
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. Keeping this in mind we’re going to check out the key hedge fund action surrounding Suzano S.A. (NYSE:SUZ).
How are hedge funds trading Suzano S.A. (NYSE:SUZ)?
Heading into the fourth quarter of 2019, a total of 4 of the hedge funds tracked by Insider Monkey were long this stock, a change of 100% from the previous quarter. The graph below displays the number of hedge funds with bullish position in SUZ over the last 17 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Of the funds tracked by Insider Monkey, Renaissance Technologies has the biggest position in Suzano S.A. (NYSE:SUZ), worth close to $34.7 million, corresponding to less than 0.1%% of its total 13F portfolio. The second largest stake is held by AQR Capital Management, led by Cliff Asness, holding a $0.7 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Other peers that hold long positions comprise Israel Englander’s Millennium Management, Paul Marshall and Ian Wace’s Marshall Wace and . In terms of the portfolio weights assigned to each position Renaissance Technologies allocated the biggest weight to Suzano S.A. (NYSE:SUZ), around 0.03% of its 13F portfolio. Millennium Management is also relatively very bullish on the stock, dishing out 0.0009 percent of its 13F equity portfolio to SUZ.
Consequently, specific money managers have been driving this bullishness. Millennium Management, managed by Israel Englander, assembled the biggest position in Suzano S.A. (NYSE:SUZ). Millennium Management had $0.6 million invested in the company at the end of the quarter. Paul Marshall and Ian Wace’s Marshall Wace also made a $0 million investment in the stock during the quarter.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Suzano S.A. (NYSE:SUZ) but similarly valued. We will take a look at Amarin Corporation plc (NASDAQ:AMRN), Grupo Aeroportuario del Pacifico, S.A.B. de C.V. (NYSE:PAC), L Brands Inc (NYSE:LB), and Tripadvisor Inc (NASDAQ:TRIP). All of these stocks’ market caps resemble SUZ’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| AMRN | 29 | 1392510 | -4 |
| PAC | 3 | 93322 | -1 |
| LB | 36 | 542095 | 6 |
| TRIP | 29 | 1050535 | 3 |
| Average | 24.25 | 769616 | 1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 24.25 hedge funds with bullish positions and the average amount invested in these stocks was $770 million. That figure was $36 million in SUZ’s case. L Brands Inc (NYSE:LB) is the most popular stock in this table. On the other hand Grupo Aeroportuario del Pacifico, S.A.B. de C.V. (NYSE:PAC) is the least popular one with only 3 bullish hedge fund positions. Suzano S.A. (NYSE:SUZ) is not the least popular stock in this group but hedge fund interest is still below average. 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 SUZ as the stock returned 11.5% during the first two months of Q4 and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.