Hedge fund managers like David Einhorn, Bill Ackman, or Carl Icahn became billionaires through reaping large profits for their investors, which is why piggybacking their stock picks may provide us with significant returns as well. Many hedge funds, like Paul Singer’s Elliott Management, are pretty secretive, but we can still get some insights by analyzing their quarterly 13F filings. One of the most fertile grounds for large abnormal returns is hedge funds’ most popular small-cap picks, which are not so widely followed and often trade at a discount to their intrinsic value. In this article we will check out hedge fund activity in another small-cap stock: Steel Dynamics, Inc. (NASDAQ:STLD).
Is Steel Dynamics, Inc. (NASDAQ:STLD) a marvelous investment right now? Prominent investors are taking a bearish view. The number of long hedge fund bets were cut by 3 recently. Our calculations also showed that STLD isn’t among the 30 most popular stocks among hedge funds. STLD was in 27 hedge funds’ portfolios at the end of March. There were 30 hedge funds in our database with STLD positions at the end of the previous quarter.
Today there are a large number of formulas investors have at their disposal to appraise their holdings. A pair of the less known formulas are hedge fund and insider trading moves. We have shown that, historically, those who follow the best picks of the top money managers can beat the S&P 500 by a superb margin (see the details here).
Let’s take a glance at the fresh hedge fund action surrounding Steel Dynamics, Inc. (NASDAQ:STLD).
How have hedgies been trading Steel Dynamics, Inc. (NASDAQ:STLD)?
At Q1’s end, a total of 27 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -10% from the previous quarter. By comparison, 30 hedge funds held shares or bullish call options in STLD a year ago. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, AQR Capital Management was the largest shareholder of Steel Dynamics, Inc. (NASDAQ:STLD), with a stake worth $109.4 million reported as of the end of March. Trailing AQR Capital Management was D E Shaw, which amassed a stake valued at $98.6 million. Millennium Management, GLG Partners, and Marshall Wace LLP were also very fond of the stock, giving the stock large weights in their portfolios.
Judging by the fact that Steel Dynamics, Inc. (NASDAQ:STLD) has experienced a decline in interest from the entirety of the hedge funds we track, it’s easy to see that there was a specific group of funds who sold off their entire stakes heading into Q3. It’s worth mentioning that Steve Cohen’s Point72 Asset Management sold off the largest position of the 700 funds tracked by Insider Monkey, totaling an estimated $26 million in stock. Sara Nainzadeh’s fund, Centenus Global Management, also dropped its stock, about $2.4 million worth. These transactions are interesting, as total hedge fund interest dropped by 3 funds heading into Q3.
Let’s also examine hedge fund activity in other stocks similar to Steel Dynamics, Inc. (NASDAQ:STLD). We will take a look at Tyler Technologies, Inc. (NYSE:TYL), Kimco Realty Corp (NYSE:KIM), Omega Healthcare Investors Inc (NYSE:OHI), and Oaktree Capital Group LLC (NYSE:OAK). 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 |
|---|---|---|---|
| TYL | 31 | 697752 | 7 |
| KIM | 11 | 71725 | -5 |
| OHI | 13 | 242355 | 2 |
| OAK | 15 | 201018 | 8 |
| Average | 17.5 | 303213 | 3 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 17.5 hedge funds with bullish positions and the average amount invested in these stocks was $303 million. That figure was $406 million in STLD’s case. Tyler Technologies, Inc. (NYSE:TYL) is the most popular stock in this table. On the other hand Kimco Realty Corp (NYSE:KIM) is the least popular one with only 11 bullish hedge fund positions. Steel Dynamics, Inc. (NASDAQ:STLD) is not the most popular stock in this group but hedge fund interest is still above average. 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 1.9% in Q2 through May 30th and outperformed the S&P 500 ETF (SPY) by more than 3 percentage points. Unfortunately STLD wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on STLD were disappointed as the stock returned -27.5% during the same period 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 13 of these stocks already outperformed the market so far in Q2.
Disclosure: None. This article was originally published at Insider Monkey.
