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Is Steel Dynamics, Inc. (STLD) a Good Stock To Buy?

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 funds have been producing disappointing net returns in recent years, however that was partly due to the poor performance of small-cap stocks in general. Well, small-cap stocks finally turned the corner and have been beating the large-cap stocks by more than 10 percentage points over the last 5 months.This means the relevancy of hedge funds’ public filings became inarguable, as they may reveal numerous high-potential stocks. The following article will discuss the smart money sentiment towards Steel Dynamics, Inc. (NASDAQ:STLD).

Steel Dynamics, Inc. (NASDAQ:STLD) has seen an increase in activity from the world’s largest hedge funds in recent months. At the end of Seotember, the company was included in the 13F portfolios of 33 funds tracked by Insider Monkey, compared to 31 funds a quarter earlier.  The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Commscope Holding Company Inc (NASDAQ:COMM), Owens Corning (NYSE:OC), and Sensata Technologies Holding N.V. (NYSE:ST) to gather more data points.

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At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.

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Now, let’s analyze the fresh action surrounding Steel Dynamics, Inc. (NASDAQ:STLD).

How are hedge funds trading Steel Dynamics, Inc. (NASDAQ:STLD)?

During the third quarter, the number of hedge funds tracked by Insider Monkey that held long positions in Steel Dynamics increased by 6% to 33. With the smart money’s sentiment swirling, there exists a select group of notable hedge fund managers who were upping their stakes considerably (or already accumulated large positions).


According to Insider Monkey’s hedge fund database, Cliff Asness’ AQR Capital Management holds the biggest position in Steel Dynamics, Inc. (NASDAQ:STLD). AQR Capital Management has a $98.8 million position in the stock, comprising 0.2% of its 13F portfolio. Coming in second is Israel Englander’s Millennium Management, with a $73.2 million position; the fund has 0.1% of its 13F portfolio invested in the stock. Other hedge funds and institutional investors with similar optimism consist of Jorge Paulo Lemann’s 3G Capital and Robert Polak’s Anchor Bolt Capital.

Now, specific money managers were breaking ground themselves. Highline Capital Management, led by Jacob Doft, established the most valuable position in Steel Dynamics, Inc. (NASDAQ:STLD). Highline Capital Management had $70.5 million invested in the company at the end of the quarter. Jonathan Barrett and Paul Segal’s Luminus Management also made a $25.7 million investment in the stock during the quarter. The other funds with new positions in the stock are Steve Cohen’s Point72 Asia (Singapore), Ken Griffin’s Citadel Investment Group, and Sander Gerber’s Hudson Bay Capital Management.

Let’s now review hedge fund activity in other stocks similar to Steel Dynamics, Inc. (NASDAQ:STLD). We will take a look at Commscope Holding Company Inc (NASDAQ:COMM), Owens Corning (NYSE:OC), Sensata Technologies Holding N.V. (NYSE:ST), and Macquarie Infrastructure Company LLC (NYSE:MIC). This group of stocks’ market valuations match STLD’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
COMM 52 2887006 5
OC 35 1197532 1
ST 27 1392748 -1
MIC 45 1058126 -2

As you can see these stocks had an average of 40 funds with bullish positions at the end of September and the average amount invested in these stocks was $1.63 billion. That figure was $634 million in STLD’s case. Commscope Holding Company Inc (NASDAQ:COMM) is the most popular stock in this table, while Sensata Technologies Holding N.V. (NYSE:ST) is the least popular one with only 27 funds reporting long positions. Steel Dynamics, Inc. (NASDAQ:STLD) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard Commscope Holding Company Inc (NASDAQ:COMM) might be a better candidate to consider a long position.