Hedge Funds Warming Up To Sensata Technologies Holding (ST)

In this article we will take a look at whether hedge funds think Sensata Technologies Holding plc (NYSE:ST) is a good investment right now. We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, unconventional data sources, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.

Sensata Technologies Holding plc (NYSE:ST) was in 26 hedge funds’ portfolios at the end of the first quarter of 2020. ST has experienced an increase in hedge fund sentiment of late. There were 23 hedge funds in our database with ST holdings at the end of the previous quarter. Our calculations also showed that ST 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.

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 101% since March 2017 and outperformed the S&P 500 ETFs by more than 58 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Ric Dillon Diamond Hill Capital

Ric Dillon of Diamond Hill Capital

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. Keeping this in mind we’re going to go over the fresh hedge fund action regarding Sensata Technologies Holding plc (NYSE:ST).

Hedge fund activity in Sensata Technologies Holding plc (NYSE:ST)

Heading into the second quarter of 2020, a total of 26 of the hedge funds tracked by Insider Monkey were long this stock, a change of 13% from the fourth quarter of 2019. The graph below displays the number of hedge funds with bullish position in ST over the last 18 quarters. With the smart money’s positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were boosting their stakes considerably (or already accumulated large positions).

Is ST A Good Stock To Buy?

More specifically, Generation Investment Management was the largest shareholder of Sensata Technologies Holding plc (NYSE:ST), with a stake worth $353 million reported as of the end of September. Trailing Generation Investment Management was Orbis Investment Management, which amassed a stake valued at $112.8 million. Diamond Hill Capital, Impax Asset Management, and Arrowstreet Capital 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 Goodnow Investment Group allocated the biggest weight to Sensata Technologies Holding plc (NYSE:ST), around 2.74% of its 13F portfolio. Generation Investment Management is also relatively very bullish on the stock, dishing out 2.51 percent of its 13F equity portfolio to ST.

With a general bullishness amongst the heavyweights, some big names have jumped into Sensata Technologies Holding plc (NYSE:ST) headfirst. Ariose Capital, managed by Yi Xin, created the largest position in Sensata Technologies Holding plc (NYSE:ST). Ariose Capital had $1.9 million invested in the company at the end of the quarter. Charles Davidson and Joseph Jacobs’s Wexford Capital also initiated a $1.7 million position during the quarter. The other funds with brand new ST positions are Joel Greenblatt’s Gotham Asset Management, Ryan Tolkin (CIO)’s Schonfeld Strategic Advisors, and John Overdeck and David Siegel’s Two Sigma Advisors.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Sensata Technologies Holding plc (NYSE:ST) but similarly valued. We will take a look at Prosperity Bancshares, Inc. (NYSE:PB), Owl Rock Capital Corporation (NYSE:ORCC), Elastic N.V. (NYSE:ESTC), and WEX Inc (NYSE:WEX). This group of stocks’ market caps match ST’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
PB 16 81448 -6
ORCC 11 118961 3
ESTC 33 835088 -6
WEX 35 354821 10
Average 23.75 347580 0.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 23.75 hedge funds with bullish positions and the average amount invested in these stocks was $348 million. That figure was $700 million in ST’s case. WEX Inc (NYSE:WEX) is the most popular stock in this table. On the other hand Owl Rock Capital Corporation (NYSE:ORCC) is the least popular one with only 11 bullish hedge fund positions. Sensata Technologies Holding plc (NYSE:ST) 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 ST as the stock returned 23.2% 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.