Is SCHN A Good Stock To Buy Now?

Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the third quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 5 years and analyze what the smart money thinks of Schnitzer Steel Industries, Inc. (NASDAQ:SCHN) based on that data.

Is SCHN a good stock to buy now? Schnitzer Steel Industries, Inc. (NASDAQ:SCHN) has seen an increase in hedge fund sentiment of late. Schnitzer Steel Industries, Inc. (NASDAQ:SCHN) was in 13 hedge funds’ portfolios at the end of September. The all time high for this statistic is 19. There were 11 hedge funds in our database with SCHN positions at the end of the second quarter. Our calculations also showed that SCHN isn’t among the 30 most popular stocks among hedge funds (click for Q3 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.

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 66 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 13% through November 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Donald Sussman Paloma Partners

Donald Sussman of Paloma Partners

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. Now let’s check out the new hedge fund action regarding Schnitzer Steel Industries, Inc. (NASDAQ:SCHN).

Do Hedge Funds Think SCHN Is A Good Stock To Buy Now?

At Q3’s end, a total of 13 of the hedge funds tracked by Insider Monkey were long this stock, a change of 18% from the second quarter of 2020. On the other hand, there were a total of 12 hedge funds with a bullish position in SCHN a year ago. With hedge funds’ sentiment swirling, there exists an “upper tier” of notable hedge fund managers who were boosting their holdings considerably (or already accumulated large positions).

Among these funds, Millennium Management held the most valuable stake in Schnitzer Steel Industries, Inc. (NASDAQ:SCHN), which was worth $2 million at the end of the third quarter. On the second spot was D E Shaw which amassed $1.6 million worth of shares. Manatuck Hill Partners, Winton Capital Management, 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 Manatuck Hill Partners allocated the biggest weight to Schnitzer Steel Industries, Inc. (NASDAQ:SCHN), around 0.6% of its 13F portfolio. Engineers Gate Manager is also relatively very bullish on the stock, setting aside 0.03 percent of its 13F equity portfolio to SCHN.

As one would reasonably expect, specific money managers were breaking ground themselves. Manatuck Hill Partners, managed by Mark Broach, assembled the most outsized position in Schnitzer Steel Industries, Inc. (NASDAQ:SCHN). Manatuck Hill Partners had $1.3 million invested in the company at the end of the quarter. Michael Gelband’s ExodusPoint Capital also initiated a $0.4 million position during the quarter. The only other fund with a brand new SCHN position is Donald Sussman’s Paloma Partners.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Schnitzer Steel Industries, Inc. (NASDAQ:SCHN) but similarly valued. These stocks are Rite Aid Corporation (NYSE:RAD), Quotient Limited (NASDAQ:QTNT), Odonate Therapeutics, Inc. (NASDAQ:ODT), ViewRay, Inc. (NASDAQ:VRAY), Crinetics Pharmaceuticals, Inc. (NASDAQ:CRNX), 111, Inc. (NASDAQ:YI), and AMC Entertainment Holdings Inc (NYSE:AMC). All of these stocks’ market caps are closest to SCHN’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
RAD 10 31761 -2
QTNT 26 213732 9
ODT 17 253128 1
VRAY 11 108993 -1
CRNX 15 209097 -3
YI 4 7523 0
AMC 12 7804 4
Average 13.6 118863 1.1

View table here if you experience formatting issues.

As you can see these stocks had an average of 13.6 hedge funds with bullish positions and the average amount invested in these stocks was $119 million. That figure was $10 million in SCHN’s case. Quotient Limited (NASDAQ:QTNT) is the most popular stock in this table. On the other hand 111, Inc. (NASDAQ:YI) is the least popular one with only 4 bullish hedge fund positions. Schnitzer Steel Industries, Inc. (NASDAQ:SCHN) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for SCHN is 48. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. 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 percentage points. These stocks gained 32.9% in 2020 through December 8th and still beat the market by 16.2 percentage points. A small number of hedge funds were also right about betting on SCHN as the stock returned 49.6% since the end of the third quarter (through 12/8) and outperformed the market by an even larger margin.

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