The financial regulations require hedge funds and wealthy investors that exceeded the $100 million equity holdings threshold to file a report that shows their positions at the end of every quarter. Even though it isn’t the intention, these filings to a certain extent level the playing field for ordinary investors. The latest round of 13F filings disclosed the funds’ positions on March 31st, about a week after the S&P 500 Index bottomed. We at Insider Monkey have made an extensive database of more than 821 of those established hedge funds and famous value investors’ filings. In this article, we analyze how these elite funds and prominent investors traded Simpson Manufacturing Co, Inc. (NYSE:SSD) based on those filings.
Is Simpson Manufacturing Co, Inc. (NYSE:SSD) a buy, sell, or hold? The smart money is becoming more confident. The number of bullish hedge fund bets inched up by 2 recently. Our calculations also showed that SSD isn’t among the 30 most popular stocks among hedge funds (click for Q1 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.
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’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 58 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
We leave no stone unturned when looking for the next great investment idea. For example, we believe electric vehicles and energy storage are set to become giant markets, and we want to take advantage of the declining lithium prices amid the COVID-19 pandemic. So we are checking out investment opportunities like these. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now let’s review the fresh hedge fund action surrounding Simpson Manufacturing Co, Inc. (NYSE:SSD).
Hedge fund activity in Simpson Manufacturing Co, Inc. (NYSE:SSD)
At Q1’s end, a total of 26 of the hedge funds tracked by Insider Monkey were long this stock, a change of 8% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards SSD over the last 18 quarters. So, let’s examine 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, Ariel Investments, managed by John W. Rogers, holds the largest position in Simpson Manufacturing Co, Inc. (NYSE:SSD). Ariel Investments has a $57.2 million position in the stock, comprising 1% of its 13F portfolio. The second most bullish fund manager is Chuck Royce of Royce & Associates, with a $32 million position; the fund has 0.4% of its 13F portfolio invested in the stock. Remaining professional money managers with similar optimism include Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, Renaissance Technologies and Israel Englander’s Millennium Management. 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% of its 13F portfolio. Royce & Associates is also relatively very bullish on the stock, earmarking 0.44 percent of its 13F equity portfolio to SSD.
As industrywide interest jumped, key hedge funds were leading the bulls’ herd. Adage Capital Management, managed by Phill Gross and Robert Atchinson, created the most outsized position in Simpson Manufacturing Co, Inc. (NYSE:SSD). Adage Capital Management had $6.4 million invested in the company at the end of the quarter. Peter Muller’s PDT Partners also initiated a $0.6 million position during the quarter. The other funds with new positions in the stock are Bruce Kovner’s Caxton Associates LP, Tim Curro’s Value Holdings LP, and Steve Cohen’s Point72 Asset Management.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Simpson Manufacturing Co, Inc. (NYSE:SSD) but similarly valued. We will take a look at New Relic Inc (NYSE:NEWR), WD-40 Company (NASDAQ:WDFC), Livongo Health, Inc. (NASDAQ:LVGO), and Cosan Limited (NYSE:CZZ). This group of stocks’ market valuations are closest to SSD’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 20 hedge funds with bullish positions and the average amount invested in these stocks was $308 million. That figure was $197 million in SSD’s case. New Relic Inc (NYSE:NEWR) is the most popular stock in this table. On the other hand Cosan Limited (NYSE:CZZ) is the least popular one with only 15 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. 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 8.3% in 2020 through the end of May but still beat the market by 13.2 percentage points. Hedge funds were also right about betting on SSD as the stock returned 29.7% in Q2 (through the end of May) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
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Disclosure: None. This article was originally published at Insider Monkey.