Most investors tend to think that hedge funds and other asset managers are worthless, as they cannot beat even simple index fund portfolios. In fact, most people expect hedge funds to compete with and outperform the bull market that we have witnessed in recent years. However, hedge funds are generally partially hedged and aim at delivering attractive risk-adjusted returns rather than following the ups and downs of equity markets hoping that they will outperform the broader market. Our research shows that certain hedge funds do have great stock picking skills (and we can identify these hedge funds in advance pretty accurately), so let’s take a glance at the smart money sentiment towards Service Corporation International (NYSE:SCI).
Is SCI a good stock to buy? Service Corporation International (NYSE:SCI) investors should pay attention to an increase in activity from the world’s largest hedge funds of late. Service Corporation International (NYSE:SCI) was in 30 hedge funds’ portfolios at the end of September. The all time high for this statistic is 37. There were 27 hedge funds in our database with SCI positions at the end of the second quarter. Our calculations also showed that SCI 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.
In the 21st century investor’s toolkit there are a multitude of formulas stock traders put to use to evaluate stocks. A duo of the best formulas are hedge fund and insider trading interest. We have shown that, historically, those who follow the best picks of the elite investment managers can outclass the market by a very impressive amount (see the details here).
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, the House passed a landmark bill decriminalizing marijuana. So, we are checking out this under the radar cannabis stock right now. We go through lists like the 15 best blue chip stocks to buy 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. Keeping this in mind let’s take a look at the fresh hedge fund action regarding Service Corporation International (NYSE:SCI).
Do Hedge Funds Think SCI Is A Good Stock To Buy Now?
At the end of the third quarter, a total of 30 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 11% from the second quarter of 2020. By comparison, 20 hedge funds held shares or bullish call options in SCI a year ago. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Service Corporation International (NYSE:SCI) was held by Select Equity Group, which reported holding $541.7 million worth of stock at the end of September. It was followed by Two Sigma Advisors with a $34.8 million position. Other investors bullish on the company included Arrowstreet Capital, D E Shaw, and Millennium Management. In terms of the portfolio weights assigned to each position Select Equity Group allocated the biggest weight to Service Corporation International (NYSE:SCI), around 2.66% of its 13F portfolio. Cerebellum Capital is also relatively very bullish on the stock, dishing out 0.29 percent of its 13F equity portfolio to SCI.
As industrywide interest jumped, some big names were leading the bulls’ herd. Renaissance Technologies, created the largest position in Service Corporation International (NYSE:SCI). Renaissance Technologies had $18.3 million invested in the company at the end of the quarter. Paul Marshall and Ian Wace’s Marshall Wace LLP also initiated a $7.7 million position during the quarter. The other funds with new positions in the stock are Michael Gelband’s ExodusPoint Capital, Jinghua Yan’s TwinBeech Capital, and Peter Muller’s PDT Partners.
Let’s go over hedge fund activity in other stocks similar to Service Corporation International (NYSE:SCI). These stocks are Owens Corning (NYSE:OC), SEI Investments Company (NASDAQ:SEIC), Genpact Limited (NYSE:G), Hubbell Incorporated (NYSE:HUBB), Mirati Therapeutics, Inc. (NASDAQ:MRTX), Teck Resources Ltd (NYSE:TECK), and Quanta Services Inc (NYSE:PWR). This group of stocks’ market caps match SCI’s market cap.
|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 33.4 hedge funds with bullish positions and the average amount invested in these stocks was $751 million. That figure was $728 million in SCI’s case. Owens Corning (NYSE:OC) is the most popular stock in this table. On the other hand Teck Resources Ltd (NYSE:TECK) is the least popular one with only 27 bullish hedge fund positions. Service Corporation International (NYSE:SCI) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for SCI is 41.7. 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 33.3% in 2020 through December 18th and still beat the market by 16.4 percentage points. A small number of hedge funds were also right about betting on SCI as the stock returned 16% since the end of the third quarter (through 12/18) and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.