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Is State Street Corporation (STT) Going to Burn These Hedge Funds?

Is State Street Corporation (NYSE:STT) a good investment right now? We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.

Is State Street Corporation (NYSE:STT) a healthy stock for your portfolio? Investors who are in the know are in a bullish mood. The number of long hedge fund bets increased by 4 in recent months. Our calculations also showed that STT isn’t among the 30 most popular stocks among hedge funds (see the video below). STT was in 36 hedge funds’ portfolios at the end of the second quarter of 2019. There were 32 hedge funds in our database with STT holdings at the end of the previous quarter.
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to 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 flagship best performing hedge funds strategy returned 25.8% year to date (through May 30th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 40 percentage points since its inception (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

STT_oct2019

Unlike some fund managers who are betting on Dow reaching 40000 in a year, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. We’re going to take a gander at the recent hedge fund action surrounding State Street Corporation (NYSE:STT).

How have hedgies been trading State Street Corporation (NYSE:STT)?

At the end of the second quarter, a total of 36 of the hedge funds tracked by Insider Monkey were long this stock, a change of 13% from the previous quarter. The graph below displays the number of hedge funds with bullish position in STT over the last 16 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Donald Yacktman

The largest stake in State Street Corporation (NYSE:STT) was held by Yacktman Asset Management, which reported holding $147.8 million worth of stock at the end of March. It was followed by D E Shaw with a $130.1 million position. Other investors bullish on the company included Two Sigma Advisors, Citadel Investment Group, and Arrowstreet Capital.

Consequently, key hedge funds were breaking ground themselves. Azora Capital, managed by Ravi Chopra, assembled the most outsized position in State Street Corporation (NYSE:STT). Azora Capital had $18.2 million invested in the company at the end of the quarter. Gregg Moskowitz’s Interval Partners also initiated a $8.1 million position during the quarter. The other funds with new positions in the stock are Matthew Hulsizer’s PEAK6 Capital Management, Adam Usdan’s Trellus Management Company, and David Andre and Astro Teller’s Cerebellum Capital.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as State Street Corporation (NYSE:STT) but similarly valued. These stocks are Cadence Design Systems Inc (NASDAQ:CDNS), AMETEK, Inc. (NYSE:AME), MSCI Inc (NYSE:MSCI), and Cheniere Energy Partners LP (NYSE:CQP). This group of stocks’ market values are closest to STT’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
CDNS 28 1688088 -3
AME 31 1065031 2
MSCI 36 774691 0
CQP 7 13732 0
Average 25.5 885386 -0.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 25.5 hedge funds with bullish positions and the average amount invested in these stocks was $885 million. That figure was $795 million in STT’s case. MSCI Inc (NYSE:MSCI) is the most popular stock in this table. On the other hand Cheniere Energy Partners LP (NYSE:CQP) is the least popular one with only 7 bullish hedge fund positions. State Street Corporation (NYSE:STT) is as popular as the most popular stock in this group. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Hedge funds were also right about betting on STT as the stock returned 6.5% during the third quarter and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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

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