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Is Scorpio Tankers Inc. (STNG) A Good Stock To Buy?

Before we spend countless hours researching a company, we like to analyze what insiders, hedge funds and billionaire investors think of the stock first. This is a necessary first step in our investment process because our research has shown that the elite investors’ consensus returns have been exceptional. In the following paragraphs, we find out what the billionaire investors and hedge funds think of Scorpio Tankers Inc. (NYSE:STNG).

Scorpio Tankers Inc. (NYSE:STNG) has seen a decrease in activity from the world’s largest hedge funds in recent months. STNG was in 25 hedge funds’ portfolios at the end of the first quarter of 2020. There were 33 hedge funds in our database with STNG holdings at the end of the previous quarter. Our calculations also showed that STNG 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.

At the moment there are a lot of methods market participants employ to evaluate stocks. A couple of the most innovative methods are hedge fund and insider trading interest. Our experts have shown that, historically, those who follow the top picks of the best hedge fund managers can outclass the broader indices by a superb margin (see the details here).

Sahm Adrangi Kerrisdale Capital

Sahm Adrangi of Kerrisdale Capital

We leave no stone unturned when looking for the next great investment idea. For example, we believe electric vehicles and energy storage are set to become giant markets, and we want to take advantage of the declining lithium prices amid the COVID-19 pandemic. So we are checking out investment opportunities like these. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now we’re going to view the new hedge fund action regarding Scorpio Tankers Inc. (NYSE:STNG).

What does smart money think about Scorpio Tankers Inc. (NYSE:STNG)?

At the end of the first quarter, a total of 25 of the hedge funds tracked by Insider Monkey were long this stock, a change of -24% from the previous quarter. On the other hand, there were a total of 18 hedge funds with a bullish position in STNG a year ago. With hedge funds’ sentiment swirling, there exists a few notable hedge fund managers who were upping their holdings meaningfully (or already accumulated large positions).

More specifically, Hosking Partners was the largest shareholder of Scorpio Tankers Inc. (NYSE:STNG), with a stake worth $23.5 million reported as of the end of September. Trailing Hosking Partners was Bayberry Capital Partners, which amassed a stake valued at $16.5 million. Citadel Investment Group, Marshall Wace LLP, and Point72 Asset Management 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 Bayberry Capital Partners allocated the biggest weight to Scorpio Tankers Inc. (NYSE:STNG), around 6.73% of its 13F portfolio. Appian Way Asset Management is also relatively very bullish on the stock, designating 0.86 percent of its 13F equity portfolio to STNG.

Seeing as Scorpio Tankers Inc. (NYSE:STNG) has witnessed bearish sentiment from the entirety of the hedge funds we track, it’s easy to see that there is a sect of fund managers who sold off their positions entirely heading into Q4. At the top of the heap, David Rosen’s Rubric Capital Management dropped the biggest investment of all the hedgies tracked by Insider Monkey, valued at an estimated $15.3 million in stock, and Ben Levine, Andrew Manuel and Stefan Renold’s LMR Partners was right behind this move, as the fund cut about $13.5 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest fell by 8 funds heading into Q4.

Let’s check out hedge fund activity in other stocks similar to Scorpio Tankers Inc. (NYSE:STNG). These stocks are Flagstar Bancorp Inc (NYSE:FBC), Covanta Holding Corporation (NYSE:CVA), Pacific Premier Bancorp, Inc. (NASDAQ:PPBI), and Tri Continental Corporation (NYSE:TY). This group of stocks’ market valuations are closest to STNG’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
FBC 15 66195 -5
CVA 25 55880 6
PPBI 8 30230 -4
TY 3 2165 1
Average 12.75 38618 -0.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 12.75 hedge funds with bullish positions and the average amount invested in these stocks was $39 million. That figure was $88 million in STNG’s case. Covanta Holding Corporation (NYSE:CVA) is the most popular stock in this table. On the other hand Tri Continental Corporation (NYSE:TY) is the least popular one with only 3 bullish hedge fund positions. Scorpio Tankers Inc. (NYSE:STNG) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. 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 13.9% in 2020 through June 10th but beat the market by 14.2 percentage points. Unfortunately STNG wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on STNG were disappointed as the stock returned -10.1% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.

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