The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 821 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of March 31st, a week after the market trough. We are almost done with the second quarter. Investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned almost 20% this quarter. In this article we look at how hedge funds traded Safeguard Scientifics, Inc (NYSE:SFE) and determine whether the smart money was really smart about this stock.
Safeguard Scientifics, Inc (NYSE:SFE) has seen a decrease in activity from the world’s largest hedge funds in recent months. SFE was in 11 hedge funds’ portfolios at the end of March. There were 13 hedge funds in our database with SFE positions at the end of the previous quarter. Our calculations also showed that SFE 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.
If you’d ask most investors, hedge funds are assumed to be slow, old financial tools of years past. While there are greater than 8000 funds in operation at present, Our researchers hone in on the bigwigs of this club, approximately 850 funds. These money managers oversee the lion’s share of the smart money’s total asset base, and by watching their best stock picks, Insider Monkey has figured out numerous investment strategies that have historically exceeded the market. Insider Monkey’s flagship short hedge fund strategy beat the S&P 500 short ETFs by around 20 percentage points per annum since its inception in March 2017. Our portfolio of short stocks lost 36% since February 2017 (through May 18th) even though the market was up 30% during the same period. We just shared a list of 8 short targets in our latest quarterly update .
At Insider Monkey we scour multiple sources to uncover the next great investment idea. There is a lot of volatility in the markets and this presents amazing investment opportunities from time to time. For example, this trader claims to deliver juiced up returns with one trade a week, so we are checking out his highest conviction idea. A second trader claims to score lucrative profits by utilizing a “weekend trading strategy”, so we look into his strategy’s picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We recently recommended several stocks partly inspired by legendary Bill Miller’s investor letter. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. Now we’re going to go over the fresh hedge fund action surrounding Safeguard Scientifics, Inc (NYSE:SFE).
How are hedge funds trading Safeguard Scientifics, Inc (NYSE:SFE)?
At the end of the first quarter, a total of 11 of the hedge funds tracked by Insider Monkey were long this stock, a change of -15% from one quarter earlier. By comparison, 5 hedge funds held shares or bullish call options in SFE a year ago. With the smart money’s sentiment swirling, there exists an “upper tier” of key hedge fund managers who were increasing their stakes meaningfully (or already accumulated large positions).
According to Insider Monkey’s hedge fund database, Ron Mass’s Almitas Capital has the biggest position in Safeguard Scientifics, Inc (NYSE:SFE), worth close to $3.6 million, amounting to 8% of its total 13F portfolio. On Almitas Capital’s heels is Ariel Investments, managed by John W. Rogers, which holds a $2.4 million position; less than 0.1%% of its 13F portfolio is allocated to the stock. Some other peers that hold long positions consist of Renaissance Technologies, Phil Frohlich’s Prescott Group Capital Management and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital. In terms of the portfolio weights assigned to each position Almitas Capital allocated the biggest weight to Safeguard Scientifics, Inc (NYSE:SFE), around 7.99% of its 13F portfolio. Prescott Group Capital Management is also relatively very bullish on the stock, dishing out 0.57 percent of its 13F equity portfolio to SFE.
Seeing as Safeguard Scientifics, Inc (NYSE:SFE) has witnessed a decline in interest from the aggregate hedge fund industry, we can see that there is a sect of fund managers that elected to cut their full holdings by the end of the first quarter. It’s worth mentioning that D. E. Shaw’s D E Shaw cut the largest position of the 750 funds monitored by Insider Monkey, comprising close to $0.2 million in stock. Israel Englander’s fund, Millennium Management, also dumped its stock, about $0.1 million worth. These moves are important to note, as total hedge fund interest dropped by 2 funds by the end of the first quarter.
Let’s check out hedge fund activity in other stocks similar to Safeguard Scientifics, Inc (NYSE:SFE). These stocks are Lydall, Inc. (NYSE:LDL), La Jolla Pharmaceutical Company (NASDAQ:LJPC), Citizens Holding Company (NASDAQ:CIZN), and Earthstone Energy, Inc. (NYSE:ESTE). This group of stocks’ market values are similar to SFE’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 6 hedge funds with bullish positions and the average amount invested in these stocks was $13 million. That figure was $11 million in SFE’s case. Lydall, Inc. (NYSE:LDL) is the most popular stock in this table. On the other hand Citizens Holding Company (NASDAQ:CIZN) is the least popular one with only 2 bullish hedge fund positions. Safeguard Scientifics, Inc (NYSE:SFE) 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 12.3% in 2020 through June 30th but still beat the market by 15.5 percentage points. Hedge funds were also right about betting on SFE as the stock returned 26.1% in Q2 and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.