Looking for stocks with high upside potential? Just follow the big players within the hedge fund industry. Why should you do so? Let’s take a brief look at what statistics have to say about hedge funds’ stock picking abilities to illustrate. The Standard and Poor’s 500 Index returned approximately 5.7% in the 12 months ending October 26 (including dividend payments). Conversely, hedge funds’ 30 preferred S&P 500 stocks (as of June 2014) generated a return of 15.1% during the same 12-month period, with 53% of these stock picks outperforming the broader market benchmark. Coincidence? It might happen to be so, but it is unlikely. Our research covering the last 18 years indicates that hedge funds’ stock picks generate superior risk-adjusted returns. That’s why we believe it is wise to check hedge fund activity before you invest your time or your savings on a stock like Schnitzer Steel Industries, Inc. (NASDAQ:SCHN).
Is Schnitzer Steel Industries, Inc. (NASDAQ:SCHN) ready to rally soon? Prominent investors are taking an optimistic view. The number of long hedge fund bets went up by 1 lately. Our calculations also showed that SCHN isn’t among the 30 most popular stocks among hedge funds.
Today there are plenty of formulas market participants have at their disposal to evaluate stocks. Some of the most under-the-radar formulas are hedge fund and insider trading moves. Our researchers have shown that, historically, those who follow the top picks of the elite money managers can outperform the S&P 500 by a superb margin (see the details here).
We’re going to check out the key hedge fund action surrounding Schnitzer Steel Industries, Inc. (NASDAQ:SCHN).
How are hedge funds trading Schnitzer Steel Industries, Inc. (NASDAQ:SCHN)?
At the end of the third quarter, a total of 19 of the hedge funds tracked by Insider Monkey were long this stock, a change of 6% from the previous quarter. By comparison, 16 hedge funds held shares or bullish call options in SCHN heading into this year. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Schnitzer Steel Industries, Inc. (NASDAQ:SCHN) was held by Vertex One Asset Management, which reported holding $11.4 million worth of stock at the end of September. It was followed by Millennium Management with a $10.6 million position. Other investors bullish on the company included Citadel Investment Group, Royce & Associates, and Renaissance Technologies.
As one would reasonably expect, specific money managers have jumped into Schnitzer Steel Industries, Inc. (NASDAQ:SCHN) headfirst. Marshall Wace LLP, managed by Paul Marshall and Ian Wace, created the biggest position in Schnitzer Steel Industries, Inc. (NASDAQ:SCHN). Marshall Wace LLP had $2.5 million invested in the company at the end of the quarter. Matthew Hulsizer’s PEAK6 Capital Management also made a $1.4 million investment in the stock during the quarter. The other funds with brand new SCHN positions are David Costen Haley’s HBK Investments, Gavin Saitowitz and Cisco J. del Valle’s Springbok Capital, and Dmitry Balyasny’s Balyasny Asset Management.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Schnitzer Steel Industries, Inc. (NASDAQ:SCHN) but similarly valued. We will take a look at RadNet Inc. (NASDAQ:RDNT), Sierra Wireless, Inc. (NASDAQ:SWIR), Cohu, Inc. (NASDAQ:COHU), and Oritani Financial Corp. (NASDAQ:ORIT). All of these stocks’ market caps resemble SCHN’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| RDNT | 11 | 99896 | 0 |
| SWIR | 8 | 34353 | 1 |
| COHU | 15 | 83976 | 5 |
| ORIT | 8 | 39981 | -3 |
| Average | 10.5 | 64552 | 0.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 10.5 hedge funds with bullish positions and the average amount invested in these stocks was $65 million. That figure was $58 million in SCHN’s case. Cohu, Inc. (NASDAQ:COHU) is the most popular stock in this table. On the other hand Sierra Wireless, Inc. (NASDAQ:SWIR) is the least popular one with only 8 bullish hedge fund positions. Compared to these stocks Schnitzer Steel Industries, Inc. (NASDAQ:SCHN) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.
Disclosure: None. This article was originally published at Insider Monkey.
