Here’s What Hedge Funds Think About Sensata Technologies Holding plc (ST)

We know that hedge funds generate strong, risk-adjusted returns over the long run, therefore imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, smart money investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do (like Peltz’s recent General Electric losses). However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, as the current round of 13F filings has just ended, let’s examine the smart money sentiment towards Sensata Technologies Holding plc (NYSE:ST).

Is Sensata Technologies Holding plc (NYSE:ST) a healthy stock for your portfolio? Money managers are taking a bearish view. The number of long hedge fund positions dropped by 2 recently. Our calculations also showed that st isn’t among the 30 most popular stocks among hedge funds.

So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 market by 40 percentage points since May 2014 through May 30, 2019 (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. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in our short portfolio.

Jeffrey Gates Gates Capital

We’re going to take a glance at the latest hedge fund action surrounding Sensata Technologies Holding plc (NYSE:ST).

What have hedge funds been doing with Sensata Technologies Holding plc (NYSE:ST)?

At the end of the first quarter, a total of 21 of the hedge funds tracked by Insider Monkey were long this stock, a change of -9% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards ST over the last 15 quarters. With the smart money’s sentiment swirling, there exists a select group of notable hedge fund managers who were adding to their holdings considerably (or already accumulated large positions).

No of Hedge Funds with ST Positions

Among these funds, Generation Investment Management held the most valuable stake in Sensata Technologies Holding plc (NYSE:ST), which was worth $528.3 million at the end of the first quarter. On the second spot was Cantillon Capital Management which amassed $204.2 million worth of shares. Moreover, Diamond Hill Capital, SQ Advisors, and Gates Capital Management were also bullish on Sensata Technologies Holding plc (NYSE:ST), allocating a large percentage of their portfolios to this stock.

Due to the fact that Sensata Technologies Holding plc (NYSE:ST) has faced declining sentiment from the aggregate hedge fund industry, we can see that there were a few fund managers that slashed their entire stakes in the third quarter. Intriguingly, William Crowley, William Harker, and Stephen Blass’s Ashe Capital dumped the largest position of all the hedgies followed by Insider Monkey, valued at about $31.3 million in stock. Dmitry Balyasny’s fund, Balyasny Asset Management, also sold off its stock, about $2.7 million worth. These transactions are interesting, as total hedge fund interest dropped by 2 funds in the third quarter.

Let’s check out 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 Macy’s, Inc. (NYSE:M), Crown Holdings, Inc. (NYSE:CCK), ICON Public Limited Company (NASDAQ:ICLR), and Bright Horizons Family Solutions Inc (NYSE:BFAM). This group of stocks’ market valuations resemble ST’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
M 30 733780 0
CCK 38 1021922 3
ICLR 27 809057 4
BFAM 18 294100 2
Average 28.25 714715 2.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 28.25 hedge funds with bullish positions and the average amount invested in these stocks was $715 million. That figure was $1123 million in ST’s case. Crown Holdings, Inc. (NYSE:CCK) is the most popular stock in this table. On the other hand Bright Horizons Family Solutions Inc (NYSE:BFAM) is the least popular one with only 18 bullish hedge fund positions. Sensata Technologies Holding plc (NYSE:ST) 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. Our calculations showed that top 20 most popular stocks among hedge funds returned 1.9% in Q2 through May 30th and outperformed the S&P 500 ETF (SPY) by more than 3 percentage points. Unfortunately ST wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); ST investors were disappointed as the stock returned -2.6% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as 13 of these stocks already outperformed the market so far in Q2.

Disclosure: None. This article was originally published at Insider Monkey.