Is Snap-on Incorporated (SNA) Going to Burn These Hedge Funds?

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 Snap-on Incorporated (NYSE:SNA).

Snap-on Incorporated (NYSE:SNA) was in 26 hedge funds’ portfolios at the end of the first quarter of 2020. SNA investors should pay attention to a decrease in hedge fund interest lately. There were 27 hedge funds in our database with SNA positions at the end of the previous quarter. Our calculations also showed that SNA 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In the eyes of most investors, hedge funds are assumed to be unimportant, outdated investment tools of years past. While there are over 8000 funds in operation at present, Our researchers look at the aristocrats of this group, around 850 funds. These money managers administer bulk of the smart money’s total capital, and by shadowing their inimitable stock picks, Insider Monkey has uncovered numerous investment strategies that have historically defeated the broader indices. Insider Monkey’s flagship short hedge fund strategy beat the S&P 500 short ETFs by around 20 percentage points per annum since its inception in March 2017. Our portfolio of short stocks lost 36% since February 2017 (through May 18th) even though the market was up 30% during the same period. We just shared a list of 8 short targets in our latest quarterly update .

Bruce Kovner, Caxton Associates LP

Bruce Kovner of Caxton Associates LP

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. Keeping this in mind we’re going to take a peek at the latest hedge fund action surrounding Snap-on Incorporated (NYSE:SNA).

Hedge fund activity in Snap-on Incorporated (NYSE:SNA)

At the end of the first quarter, a total of 26 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -4% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in SNA over the last 18 quarters. With hedge funds’ capital changing hands, there exists an “upper tier” of key hedge fund managers who were increasing their stakes significantly (or already accumulated large positions).

More specifically, Ariel Investments was the largest shareholder of Snap-on Incorporated (NYSE:SNA), with a stake worth $107.1 million reported as of the end of September. Trailing Ariel Investments was AQR Capital Management, which amassed a stake valued at $65.1 million. Pzena Investment Management, East Side Capital (RR Partners), and Citadel Investment Group 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 East Side Capital (RR Partners) allocated the biggest weight to Snap-on Incorporated (NYSE:SNA), around 5.65% of its 13F portfolio. Ariel Investments is also relatively very bullish on the stock, earmarking 1.88 percent of its 13F equity portfolio to SNA.

Due to the fact that Snap-on Incorporated (NYSE:SNA) has experienced falling interest from the smart money, it’s safe to say that there exists a select few hedge funds who were dropping their positions entirely by the end of the first quarter. Interestingly, Jeffrey Gates’s Gates Capital Management sold off the largest position of the 750 funds followed by Insider Monkey, totaling about $53 million in stock. Anand Parekh’s fund, Alyeska Investment Group, also sold off its stock, about $1.1 million worth. These moves are important to note, as aggregate hedge fund interest fell by 1 funds by the end of the first quarter.

Let’s go over hedge fund activity in other stocks similar to Snap-on Incorporated (NYSE:SNA). We will take a look at Gaming and Leisure Properties Inc (NASDAQ:GLPI), Newell Brands Inc. (NASDAQ:NWL), Bright Horizons Family Solutions Inc (NYSE:BFAM), and Sociedad Quimica y Minera de Chile S.A. (NYSE:SQM). This group of stocks’ market valuations resemble SNA’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
GLPI 35 475226 6
NWL 24 1004534 -7
BFAM 27 262204 -7
SQM 10 53846 -3
Average 24 448953 -2.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 24 hedge funds with bullish positions and the average amount invested in these stocks was $449 million. That figure was $285 million in SNA’s case. Gaming and Leisure Properties Inc (NASDAQ:GLPI) is the most popular stock in this table. On the other hand Sociedad Quimica y Minera de Chile S.A. (NYSE:SQM) is the least popular one with only 10 bullish hedge fund positions. Snap-on Incorporated (NYSE:SNA) is not the most popular stock in this group but hedge fund interest is still above average. 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 8.3% in 2020 through the end of May but still beat the market by 13.2 percentage points. Hedge funds were also right about betting on SNA, though not to the same extent, as the stock returned 20.2% during the first two months of the second quarter and outperformed the market as well.

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