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. 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 December 31st. We at Insider Monkey have made an extensive database of more than 835 of those established hedge funds and famous value investors’ filings. In this article, we analyze how these elite funds and prominent investors traded Silgan Holdings Inc. (NASDAQ:SLGN) based on those filings.
Silgan Holdings Inc. (NASDAQ:SLGN) investors should pay attention to a decrease in hedge fund interest of late. SLGN was in 17 hedge funds’ portfolios at the end of December. There were 18 hedge funds in our database with SLGN positions at the end of the previous quarter. Our calculations also showed that SLGN 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).
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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 41 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 35.3% through March 3rd. 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 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 review the latest hedge fund action encompassing Silgan Holdings Inc. (NASDAQ:SLGN).
What does smart money think about Silgan Holdings Inc. (NASDAQ:SLGN)?
Heading into the first quarter of 2020, a total of 17 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -6% from the third quarter of 2019. The graph below displays the number of hedge funds with bullish position in SLGN 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.
Among these funds, Cardinal Capital held the most valuable stake in Silgan Holdings Inc. (NASDAQ:SLGN), which was worth $113.9 million at the end of the third quarter. On the second spot was AQR Capital Management which amassed $44.2 million worth of shares. Renaissance Technologies, GLG Partners, 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 Cardinal Capital allocated the biggest weight to Silgan Holdings Inc. (NASDAQ:SLGN), around 3.48% of its 13F portfolio. AQR Capital Management is also relatively very bullish on the stock, dishing out 0.05 percent of its 13F equity portfolio to SLGN.
Because Silgan Holdings Inc. (NASDAQ:SLGN) has witnessed bearish sentiment from the aggregate hedge fund industry, it’s easy to see that there lies a certain “tier” of hedgies that decided to sell off their full holdings in the third quarter. At the top of the heap, David Harding’s Winton Capital Management sold off the largest stake of the 750 funds monitored by Insider Monkey, valued at an estimated $2.6 million in stock, and Alec Litowitz and Ross Laser’s Magnetar Capital was right behind this move, as the fund dropped about $0.7 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest was cut by 1 funds in the third quarter.
Let’s go over hedge fund activity in other stocks similar to Silgan Holdings Inc. (NASDAQ:SLGN). We will take a look at Omnicell, Inc. (NASDAQ:OMCL), Neogen Corporation (NASDAQ:NEOG), CRISPR Therapeutics AG (NASDAQ:CRSP), and Lithia Motors Inc (NYSE:LAD). This group of stocks’ market valuations resemble SLGN’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| OMCL | 13 | 96313 | 2 |
| NEOG | 16 | 17534 | 1 |
| CRSP | 30 | 297776 | 13 |
| LAD | 29 | 661944 | 3 |
| Average | 22 | 268392 | 4.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 22 hedge funds with bullish positions and the average amount invested in these stocks was $268 million. That figure was $210 million in SLGN’s case. CRISPR Therapeutics AG (NASDAQ:CRSP) is the most popular stock in this table. On the other hand Omnicell, Inc. (NASDAQ:OMCL) is the least popular one with only 13 bullish hedge fund positions. Silgan Holdings Inc. (NASDAQ:SLGN) 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 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 still beat the market by 5.5 percentage points. A small number of hedge funds were also right about betting on SLGN as the stock returned -13.6% during the same time period and outperformed the market by an even larger margin.
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.
