Is SFL A Good Stock To Buy Now?

Many prominent investors, including Warren Buffett, David Tepper and Stan Druckenmiller, have been cautious regarding the current bull market and missed out as the stock market reached another high in recent weeks. On the other hand, technology hedge funds weren’t timid and registered double digit market beating gains. Financials, energy and industrial stocks aren’t doing great but many of the stocks that delivered strong returns since March are still going very strong and hedge funds actually increased their positions in these stocks. In this article we will find out how hedge fund sentiment to SFL Corporation Ltd. (NYSE:SFL) changed recently.

Is SFL a good stock to buy now? SFL Corporation Ltd. (NYSE:SFL) has seen a decrease in activity from the world’s largest hedge funds in recent months. SFL Corporation Ltd. (NYSE:SFL) was in 10 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistics is 16. There were 15 hedge funds in our database with SFL positions at the end of the second quarter. Our calculations also showed that SFL 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.

To most stock holders, hedge funds are viewed as underperforming, old investment tools of yesteryear. While there are over 8000 funds with their doors open at present, We choose to focus on the bigwigs of this club, approximately 850 funds. These money managers control most of the hedge fund industry’s total capital, and by observing their matchless stock picks, Insider Monkey has determined various investment strategies that have historically surpassed the broader indices. Insider Monkey’s flagship short hedge fund strategy exceeded the S&P 500 short ETFs by around 20 percentage points a year since its inception in March 2017. Our portfolio of short stocks lost 13% since February 2017 (through November 17th) even though the market was up 65% during the same period. We just shared a list of 6 short targets in our latest quarterly update .

Ken Griffin

Ken Griffin of Citadel Investment Group

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. With all of this in mind we’re going to take a gander at the key hedge fund action regarding SFL Corporation Ltd. (NYSE:SFL).

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

At the end of the third quarter, a total of 10 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -33% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards SFL over the last 21 quarters. With the smart money’s capital changing hands, there exists a few noteworthy hedge fund managers who were increasing their holdings considerably (or already accumulated large positions).

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Millennium Management, managed by Israel Englander, holds the largest position in SFL Corporation Ltd. (NYSE:SFL). Millennium Management has a $12.9 million position in the stock, comprising less than 0.1%% of its 13F portfolio. On Millennium Management’s heels is Renaissance Technologies, holding a $9.9 million position; less than 0.1%% of its 13F portfolio is allocated to the stock. Remaining members of the smart money with similar optimism comprise Paul Tudor Jones’s Tudor Investment Corp, Peter Muller’s PDT Partners and Ken Griffin’s Citadel Investment Group. In terms of the portfolio weights assigned to each position PDT Partners allocated the biggest weight to SFL Corporation Ltd. (NYSE:SFL), around 0.11% of its 13F portfolio. Tudor Investment Corp is also relatively very bullish on the stock, setting aside 0.1 percent of its 13F equity portfolio to SFL.

Due to the fact that SFL Corporation Ltd. (NYSE:SFL) has faced declining sentiment from the smart money, it’s easy to see that there were a few hedge funds that decided to sell off their full holdings last quarter. It’s worth mentioning that Israel Englander’s Millennium Management dumped the largest stake of all the hedgies tracked by Insider Monkey, comprising an estimated $7.7 million in stock, and Clint Carlson’s Carlson Capital was right behind this move, as the fund said goodbye to about $4.8 million worth. These transactions are intriguing to say the least, as total hedge fund interest fell by 5 funds last quarter.

Let’s now review hedge fund activity in other stocks similar to SFL Corporation Ltd. (NYSE:SFL). We will take a look at AZZ Incorporated (NYSE:AZZ), Gossamer Bio, Inc. (NASDAQ:GOSS), QAD Inc. (NASDAQ:QADB), Celestica Inc. (NYSE:CLS), Amphastar Pharmaceuticals Inc (NASDAQ:AMPH), istar Inc (NYSE:STAR), and Employers Holdings, Inc. (NYSE:EIG). This group of stocks’ market values are similar to SFL’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
AZZ 15 66278 -5
GOSS 21 196663 2
QADB 1 752 0
CLS 15 87990 4
AMPH 8 16840 -1
STAR 14 102800 1
EIG 12 52197 0
Average 12.3 74789 0.1

View table here if you experience formatting issues.

As you can see these stocks had an average of 12.3 hedge funds with bullish positions and the average amount invested in these stocks was $75 million. That figure was $31 million in SFL’s case. Gossamer Bio, Inc. (NASDAQ:GOSS) is the most popular stock in this table. On the other hand QAD Inc. (NASDAQ:QADB) is the least popular one with only 1 bullish hedge fund positions. SFL Corporation Ltd. (NYSE:SFL) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for SFL is 41.3. 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. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. 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 surpassed the market again by 16.2 percentage points. Unfortunately SFL wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); SFL investors were disappointed as the stock returned -10.9% since the end of September (through 12/8) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.

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