Reputable billionaire investors such as Nelson Peltz and David Tepper generate exorbitant profits for their wealthy accredited investors (a minimum of $1 million in investable assets would be required to invest in a hedge fund and most successful hedge funds won’t accept your savings unless you commit at least $5 million) by pinpointing winning small-cap stocks. There is little or no publicly-available information at all on some of these small companies, which makes it hard for an individual investor to pin down a winner within the small-cap space. However, hedge funds and other big asset managers can do the due diligence and analysis for you instead, thanks to their highly-skilled research teams and vast resources to conduct an appropriate evaluation process. Looking for potential winners within the small-cap galaxy of stocks? We believe following the smart money is a good starting point.
Hedge fund interest in Scorpio Bulkers Inc (NYSE:SALT) shares was flat at the end of last quarter, with 9 hedge funds bullish on the stock. This is usually a negative indicator. At the end of this article we will also compare SALT to other stocks including Franklin Covey Co. (NYSE:FC), Electrum Special Acquisition Corp (NASDAQ:ELECU), and Lantheus Holdings Inc (NASDAQ:LNTH) to get a better sense of its popularity.
At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.
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What does the smart money think about Scorpio Bulkers Inc (NYSE:SALT)?
Heading into the fourth quarter of 2016, a total of 9 of the hedge funds tracked by Insider Monkey held long positions in this stock, unchanged from the second quarter of 2016. The graph below displays the number of hedge funds with bullish position in SALT over the last 5 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to Insider Monkey’s hedge fund database, William C. Martin’s Raging Capital Management has the biggest position in Scorpio Bulkers Inc (NYSE:SALT), worth close to $31.9 million, accounting for 4.4% of its total 13F portfolio. The second largest stake is held by Q Investments (Specter Holdings), led by Geoffrey Raynor, holding a $4.7 million position; 1.2% of its 13F portfolio is allocated to the company. Some other hedge funds and institutional investors that hold long positions comprise Kevin Michael Ulrich and Anthony Davis’ Anchorage Advisors, Renaissance Technologies, one of the biggest hedge funds in the world, and Marc Lasry’s Avenue Capital. We should note that two of these hedge funds (Raging Capital Management and Q Investments (Specter Holdings)) are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.
Due to the fact that Scorpio Bulkers Inc (NYSE:SALT) has experienced declining sentiment from the entirety of the hedge funds we track, it’s easy to see that there were a few fund managers that slashed their full holdings heading into Q4. Intriguingly, Ken Griffin’s Citadel Investment Group dropped the biggest position of the “upper crust” of funds tracked by Insider Monkey, comprising an estimated $0.1 million in call options. Joel Greenblatt’s fund, Gotham Asset Management, also dropped its stock.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Scorpio Bulkers Inc (NYSE:SALT) but similarly valued. We will take a look at Franklin Covey Co. (NYSE:FC), Electrum Special Acquisition Corp (NASDAQ:ELECU), Lantheus Holdings Inc (NASDAQ:LNTH), and Celadon Group, Inc. (NYSE:CGI). This group of stocks’ market caps are closest to SALT’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| FC | 8 | 33195 | 2 |
| ELECU | 17 | 107722 | -1 |
| LNTH | 12 | 16275 | 8 |
| CGI | 9 | 12767 | 5 |
As you can see these stocks had an average of 12 hedge funds with bullish positions and the average amount invested in these stocks was $42 million. That figure was $47 million in SALT’s case. Electrum Special Acquisition Corp (NASDAQ:ELECU) is the most popular stock in this table. On the other hand Franklin Covey Co. (NYSE:FC) is the least popular one with only 8 bullish hedge fund positions. Scorpio Bulkers Inc (NYSE:SALT) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard ELECU might be a better candidate to consider taking a long position in.
Disclosure: None
