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 SITE Centers Corp. (NYSE:SITC).
Is SITC a good stock to buy now? Investors who are in the know were in a bearish mood. The number of bullish hedge fund positions dropped by 1 lately. SITE Centers Corp. (NYSE:SITC) was in 14 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistic is 23. Our calculations also showed that SITC 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.
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 66 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
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 glance at the key hedge fund action regarding SITE Centers Corp. (NYSE:SITC).
Do Hedge Funds Think SITC Is A Good Stock To Buy Now?
At the end of the third quarter, a total of 14 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -7% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards SITC over the last 21 quarters. With hedge funds’ capital changing hands, there exists a few notable hedge fund managers who were increasing their stakes significantly (or already accumulated large positions).
More specifically, Citadel Investment Group was the largest shareholder of SITE Centers Corp. (NYSE:SITC), with a stake worth $33 million reported as of the end of September. Trailing Citadel Investment Group was Millennium Management, which amassed a stake valued at $2.2 million. Renaissance Technologies, Two Sigma Advisors, and Laurion Capital 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 Tudor Investment Corp allocated the biggest weight to SITE Centers Corp. (NYSE:SITC), around 0.03% of its 13F portfolio. Athanor Capital is also relatively very bullish on the stock, designating 0.02 percent of its 13F equity portfolio to SITC.
Because SITE Centers Corp. (NYSE:SITC) has experienced falling interest from hedge fund managers, we can see that there was a specific group of money managers that decided to sell off their full holdings by the end of the third quarter. Interestingly, Ken Heebner’s Capital Growth Management sold off the biggest investment of the “upper crust” of funds monitored by Insider Monkey, worth an estimated $12.2 million in stock. Noam Gottesman’s fund, GLG Partners, also dropped its stock, about $2.5 million worth. These bearish behaviors are important to note, as total hedge fund interest dropped by 1 funds by the end of the third quarter.
Let’s now review hedge fund activity in other stocks similar to SITE Centers Corp. (NYSE:SITC). We will take a look at Chesapeake Utilities Corporation (NYSE:CPK), Tri Continental Corporation (NYSE:TY), GreenTree Hospitality Group Ltd. (NYSE:GHG), Northwest Natural Holding Company (NYSE:NWN), Belden Inc. (NYSE:BDC), Kulicke and Soffa Industries Inc. (NASDAQ:KLIC), and PROS Holdings, Inc. (NYSE:PRO). This group of stocks’ market values resemble SITC’s market value.
|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 12.7 hedge funds with bullish positions and the average amount invested in these stocks was $79 million. That figure was $41 million in SITC’s case. Kulicke and Soffa Industries Inc. (NASDAQ:KLIC) is the most popular stock in this table. On the other hand Tri Continental Corporation (NYSE:TY) is the least popular one with only 2 bullish hedge fund positions. SITE Centers Corp. (NYSE:SITC) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for SITC is 49.5. 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 32.9% in 2020 through December 8th and still beat the market by 16.2 percentage points. Hedge funds were also right about betting on SITC as the stock returned 41% since the end of Q3 (through 12/8) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.