The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 821 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of March 31st, a week after the market trough. In this article we look at what those investors think of Smith & Nephew plc (NYSE:SNN).
Smith & Nephew plc (NYSE:SNN) investors should be aware of an increase in hedge fund sentiment recently. Our calculations also showed that SNN 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.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 101% since March 2017 and outperformed the S&P 500 ETFs by more than 58 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. 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. Keeping this in mind we’re going to analyze the new hedge fund action regarding Smith & Nephew plc (NYSE:SNN).
How are hedge funds trading Smith & Nephew plc (NYSE:SNN)?
Heading into the second quarter of 2020, a total of 9 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 200% from the fourth quarter of 2019. By comparison, 13 hedge funds held shares or bullish call options in SNN a year ago. With hedgies’ sentiment swirling, there exists an “upper tier” of notable hedge fund managers who were increasing their holdings meaningfully (or already accumulated large positions).
More specifically, Arrowstreet Capital was the largest shareholder of Smith & Nephew plc (NYSE:SNN), with a stake worth $45.9 million reported as of the end of September. Trailing Arrowstreet Capital was Renaissance Technologies, which amassed a stake valued at $25.9 million. Sivik Global Healthcare, Citadel Investment Group, and D E Shaw 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 Sivik Global Healthcare allocated the biggest weight to Smith & Nephew plc (NYSE:SNN), around 4.79% of its 13F portfolio. Arrowstreet Capital is also relatively very bullish on the stock, dishing out 0.13 percent of its 13F equity portfolio to SNN.
As one would reasonably expect, specific money managers were leading the bulls’ herd. Renaissance Technologies, created the most valuable position in Smith & Nephew plc (NYSE:SNN). Renaissance Technologies had $25.9 million invested in the company at the end of the quarter. Ken Griffin’s Citadel Investment Group also made a $1.9 million investment in the stock during the quarter. The other funds with new positions in the stock are D. E. Shaw’s D E Shaw, Ryan Tolkin (CIO)’s Schonfeld Strategic Advisors, and Benjamin A. Smith’s Laurion Capital Management.
Let’s also examine hedge fund activity in other stocks similar to Smith & Nephew plc (NYSE:SNN). We will take a look at Tiffany & Co. (NYSE:TIF), Keysight Technologies Inc (NYSE:KEYS), Nasdaq, Inc. (NASDAQ:NDAQ), and Old Dominion Freight Line (NASDAQ:ODFL). This group of stocks’ market valuations are closest to SNN’s market valuation.
|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 42 hedge funds with bullish positions and the average amount invested in these stocks was $1091 million. That figure was $89 million in SNN’s case. Tiffany & Co. (NYSE:TIF) is the most popular stock in this table. On the other hand Nasdaq, Inc. (NASDAQ:NDAQ) is the least popular one with only 26 bullish hedge fund positions. Compared to these stocks Smith & Nephew plc (NYSE:SNN) is even less popular than NDAQ. Hedge funds dodged a bullet by taking a bearish stance towards SNN. Our calculations showed that the top 10 most popular hedge fund stocks returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 13.4% in 2020 through June 22nd but managed to beat the market by 15.9 percentage points. Unfortunately SNN wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was very bearish); SNN investors were disappointed as the stock returned 14.6% during the second quarter (through June 22nd) 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 most of these stocks already outperformed the market so far in 2020.
Disclosure: None. This article was originally published at Insider Monkey.