Is STE A Good Stock To Buy According To Hedge Funds?

The Insider Monkey team has completed processing the quarterly 13F filings for the September quarter submitted by the hedge funds and other money managers included in our extensive database. Most hedge fund investors experienced strong gains on the back of a strong market performance, which certainly propelled them to adjust their equity holdings so as to maintain the desired risk profile. As a result, the relevancy of these public filings and their content is indisputable, as they may reveal numerous high-potential stocks. The following article will discuss the smart money sentiment towards Steris Plc (NYSE:STE).

Is STE a good stock to buy? Hedge funds were turning less bullish. The number of bullish hedge fund positions retreated by 10 recently. Steris Plc (NYSE:STE) was in 30 hedge funds’ portfolios at the end of September. The all time high for this statistic is 40. Our calculations also showed that STE 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). There were 40 hedge funds in our database with STE holdings at the end of June.

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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Blair Levinsky of Waratah Capital Advisors

Blair Levinsky of Waratah Capital Advisors

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, the House passed a landmark bill decriminalizing marijuana. So, we are checking out this under the radar cannabis stock right now. We go through lists like the 15 best blue chip stocks to buy 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. Now we’re going to go over the latest hedge fund action regarding Steris Plc (NYSE:STE).

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

At the end of September, a total of 30 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -25% from the previous quarter. On the other hand, there were a total of 33 hedge funds with a bullish position in STE a year ago. With hedgies’ sentiment swirling, there exists a select group of notable hedge fund managers who were upping their stakes considerably (or already accumulated large positions).

The largest stake in Steris Plc (NYSE:STE) was held by Select Equity Group, which reported holding $241.2 million worth of stock at the end of September. It was followed by Fisher Asset Management with a $102.6 million position. Other investors bullish on the company included Generation Investment Management, Echo Street Capital Management, and AQR Capital Management. In terms of the portfolio weights assigned to each position Sandler Capital Management allocated the biggest weight to Steris Plc (NYSE:STE), around 2.36% of its 13F portfolio. Welch Capital Partners is also relatively very bullish on the stock, dishing out 1.5 percent of its 13F equity portfolio to STE.

Due to the fact that Steris Plc (NYSE:STE) has faced declining sentiment from hedge fund managers, it’s easy to see that there exists a select few money managers that elected to cut their entire stakes by the end of the third quarter. It’s worth mentioning that Dipak Patel’s Alight Capital dumped the largest position of the 750 funds watched by Insider Monkey, comprising close to $6.9 million in stock. Peter Rathjens, Bruce Clarke and John Campbell’s fund, Arrowstreet Capital, also dumped its stock, about $5.1 million worth. These transactions are intriguing to say the least, as total hedge fund interest dropped by 10 funds by the end of the third quarter.

Let’s also examine hedge fund activity in other stocks similar to Steris Plc (NYSE:STE). We will take a look at Ingersoll Rand Inc. (NYSE:IR), SK Telecom Co., Ltd. (NYSE:SKM), Qorvo Inc (NASDAQ:QRVO), Warner Music Group Corp. (NASDAQ:WMG), Martin Marietta Materials, Inc. (NYSE:MLM), Campbell Soup Company (NYSE:CPB), and Healthpeak Properties, Inc. (NYSE:PEAK). This group of stocks’ market caps match STE’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
IR 26 758110 -5
SKM 4 111261 -4
QRVO 51 1668362 0
WMG 20 662192 -11
MLM 38 1934050 -13
CPB 28 533547 -4
PEAK 22 290836 -1
Average 27 851194 -5.4

View table here if you experience formatting issues.

As you can see these stocks had an average of 27 hedge funds with bullish positions and the average amount invested in these stocks was $851 million. That figure was $676 million in STE’s case. Qorvo Inc (NASDAQ:QRVO) is the most popular stock in this table. On the other hand SK Telecom Co., Ltd. (NYSE:SKM) is the least popular one with only 4 bullish hedge fund positions. Steris Plc (NYSE:STE) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for STE is 45.2. 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 positive signal but 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 33.3% in 2020 through December 18th and beat the market again by 16.4 percentage points. Unfortunately STE wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on STE were disappointed as the stock returned 5.2% since the end of September (through 12/18) 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 many of these stocks already outperformed the market so far this year.

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