Many investors, including Paul Tudor Jones or Stan Druckenmiller, have been saying before the Q4 market crash that the stock market is overvalued due to a low interest rate environment that leads to companies swapping their equity for debt and focusing mostly on short-term performance such as beating the quarterly earnings estimates. In the first half of 2019, most investors recovered all of their Q4 losses as sentiment shifted and optimism dominated the US China trade negotiations. Nevertheless, many of the stocks that delivered strong returns in the first half still sport strong fundamentals and their gains were more related to the general market sentiment rather than their individual performance and hedge funds kept their bullish stance. In this article we will find out how hedge fund sentiment to Signet Jewelers Limited (NYSE:SIG) changed recently.
Hedge fund interest in Signet Jewelers Limited (NYSE:SIG) shares was flat at the end of last quarter. This is usually a negative indicator. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Fiverr International Ltd. (NYSE:FVRR), The Buckle, Inc. (NYSE:BKE), and The Gorman-Rupp Company (NYSEAMEX:GRC) to gather more data points. Our calculations also showed that SIG isn’t among the 30 most popular stocks among hedge funds (see the video below).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
In the eyes of most investors, hedge funds are perceived as slow, old financial vehicles of the past. While there are greater than 8000 funds trading today, Our experts hone in on the aristocrats of this group, about 750 funds. These hedge fund managers watch over most of the smart money’s total asset base, and by keeping track of their finest stock picks, Insider Monkey has unearthed various investment strategies that have historically outpaced the broader indices. Insider Monkey’s flagship hedge fund strategy exceeded the S&P 500 index by around 5 percentage points per year since its inception in May 2014. We were able to generate large returns even by identifying short candidates. Our portfolio of short stocks lost 25.7% since February 2017 (through September 30th) even though the market was up more than 33% during the same period. We just shared a list of 10 short targets in our latest quarterly update .
Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. We’re going to go over the recent hedge fund action encompassing Signet Jewelers Limited (NYSE:SIG).
What have hedge funds been doing with Signet Jewelers Limited (NYSE:SIG)?
At Q2’s end, a total of 17 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from the previous quarter. On the other hand, there were a total of 23 hedge funds with a bullish position in SIG a year ago. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Select Equity Group held the most valuable stake in Signet Jewelers Limited (NYSE:SIG), which was worth $86.4 million at the end of the second quarter. On the second spot was D E Shaw which amassed $17.5 million worth of shares. Moreover, AQR Capital Management, Maverick Capital, and Citadel Investment Group were also bullish on Signet Jewelers Limited (NYSE:SIG), allocating a large percentage of their portfolios to this stock.
Due to the fact that Signet Jewelers Limited (NYSE:SIG) has witnessed falling interest from hedge fund managers, it’s safe to say that there was a specific group of funds that elected to cut their full holdings in the second quarter. It’s worth mentioning that Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital dropped the biggest investment of the “upper crust” of funds followed by Insider Monkey, valued at an estimated $6.2 million in stock. Anthony Scaramucci’s fund, Skybridge Capital, also cut its stock, about $2.7 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s now review hedge fund activity in other stocks similar to Signet Jewelers Limited (NYSE:SIG). These stocks are Fiverr International Ltd. (NYSE:FVRR), The Buckle, Inc. (NYSE:BKE), The Gorman-Rupp Company (NYSEAMEX:GRC), and Tidewater Inc. (NYSE:TDW). This group of stocks’ market values are closest to SIG’s market value.
|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 11.25 hedge funds with bullish positions and the average amount invested in these stocks was $80 million. That figure was $62 million in SIG’s case. Tidewater Inc. (NYSE:TDW) is the most popular stock in this table. On the other hand The Gorman-Rupp Company (NYSEAMEX:GRC) is the least popular one with only 7 bullish hedge fund positions. Compared to these stocks Signet Jewelers Limited (NYSE:SIG) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately SIG wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on SIG were disappointed as the stock returned -4.3% during the third quarter 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 many of these stocks already outperformed the market in Q3.
Disclosure: None. This article was originally published at Insider Monkey.