Here Is What Hedge Funds Think About Servicemaster Global Holdings Inc (SERV)

Amid an overall market correction, many stocks that smart money investors were collectively bullish on tanked during the third quarter. Among them, Valeant and Micron ranked among the top 30 picks and both lost around 20%. Citigroup, which was the third most popular stock, lost 10% amid uncertainty regarding the interest rates. Nevertheless, our research shows that most of the stocks that smart money likes historically generate strong risk-adjusted returns. This is why following the smart money sentiment is a useful tool at identifying the next stock to invest in.

Is Servicemaster Global Holdings Inc (NYSE:SERV) an attractive investment today? Money managers are reducing their bets on the stock. The number of bullish hedge fund positions were cut by 1 in recent months. SERV was in 34 hedge funds’ portfolios at the end of September. There were 35 hedge funds in our database with SERV positions at the end of the previous quarter. At the end of this article we will also compare SERV to other stocks including Gentex Corporation (NASDAQ:GNTX), Pandora Media Inc (NYSE:P), and FMC Corp (NYSE:FMC) to get a better sense of its popularity.

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Now, let’s take a gander at the recent action surrounding Servicemaster Global Holdings Inc (NYSE:SERV).

What have hedge funds been doing with Servicemaster Global Holdings Inc (NYSE:SERV)?

At the end of the third quarter, a total of 34 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -3% from the second quarter. With hedgies’ positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were upping their stakes significantly (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, Jose Fernandez’s Stepstone Group has the most valuable position in Servicemaster Global Holdings Inc (NYSE:SERV), worth close to $174.5 million, accounting for 82.1% of its total 13F portfolio. The second largest stake is held by Gates Capital Management, managed by Jeffrey Gates, which holds a $128.3 million position; 5% of its 13F portfolio is allocated to the stock. Other members of the smart money that hold long positions contain Ken Griffin’s Citadel Investment Group, Peter S. Park’s Park West Asset Management and Ross Margolies’s Stelliam Investment Management.

Seeing as Servicemaster Global Holdings Inc (NYSE:SERV) has witnessed bearish sentiment from the aggregate hedge fund industry, logic holds that there was a specific group of funds that slashed their positions entirely last quarter. At the top of the heap, Matthew Knauer and Mina Faltas’ Nokota Management cut the largest position of all the hedgies followed by Insider Monkey, worth close to $16.3 million in stock. Andrew Grossman and Michael Levitt’s fund, LG Capital Management, also sold off its stock, about $10.9 million worth. These moves are important to note, as total hedge fund interest dropped by 1 funds last quarter.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Servicemaster Global Holdings Inc (NYSE:SERV) but similarly valued. We will take a look at Gentex Corporation (NASDAQ:GNTX), Pandora Media Inc (NYSE:P), FMC Corp (NYSE:FMC), and Avis Budget Group Inc. (NASDAQ:CAR). All of these stocks’ market caps are closest to SERV’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
GNTX 26 225986 0
P 36 1250498 6
FMC 33 658866 12
CAR 44 2502260 -7

As you can see these stocks had an average of 34.75 hedge funds with bullish positions and the average amount invested in these stocks was $1,159 million. That figure was $776 million in SERV’s case. Avis Budget Group Inc. (NASDAQ:CAR) is the most popular stock in this table. On the other hand Gentex Corporation (NASDAQ:GNTX) is the least popular one with only 26 bullish hedge fund positions. Servicemaster Global Holdings Inc (NYSE:SERV) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard CAR might be a better candidate to consider a long position.