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 good stock to buy right now? The smart money is getting more optimistic. The number of long hedge fund positions went up by 2 in recent months. Our calculations also showed that STLD isn’t among the 30 most popular stocks among hedge funds.
To most investors, hedge funds are assumed to be underperforming, old investment tools of the past. While there are greater than 8000 funds with their doors open at the moment, Our experts look at the elite of this group, about 750 funds. It is estimated that this group of investors control bulk of all hedge funds’ total capital, and by watching their matchless equity investments, Insider Monkey has spotted a number of investment strategies that have historically beaten the S&P 500 index. Insider Monkey’s flagship hedge fund strategy outperformed the S&P 500 index by nearly 5 percentage points per annum since its inception in May 2014 through early November 2018. We were able to generate large returns even by identifying short candidates. Our portfolio of short stocks lost 27.5% since February 2017 (through March 12th) even though the market was up nearly 25% during the same period. We just shared a list of 6 short targets in our latest quarterly update and they are already down an average of 6% in less than a month.
Let’s take a look at the key hedge fund action encompassing Steel Dynamics, Inc. (NASDAQ:STLD).
How have hedgies been trading Steel Dynamics, Inc. (NASDAQ:STLD)?
At Q4’s end, a total of 30 of the hedge funds tracked by Insider Monkey were long this stock, a change of 7% from the second quarter of 2018. On the other hand, there were a total of 30 hedge funds with a bullish position in STLD a year ago. With hedgies’ sentiment swirling, there exists an “upper tier” of notable hedge fund managers who were increasing their stakes substantially (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Ken Griffin’s Citadel Investment Group has the most valuable position in Steel Dynamics, Inc. (NASDAQ:STLD), worth close to $149.1 million, amounting to 0.1% of its total 13F portfolio. On Citadel Investment Group’s heels is Israel Englander of Millennium Management, with a $82.4 million position; the fund has 0.1% of its 13F portfolio invested in the stock. Remaining members of the smart money that hold long positions encompass Cliff Asness’s AQR Capital Management, D. E. Shaw’s D E Shaw and Noam Gottesman’s GLG Partners.
As one would reasonably expect, key hedge funds have jumped into Steel Dynamics, Inc. (NASDAQ:STLD) headfirst. Point72 Asset Management, managed by Steve Cohen, established the biggest position in Steel Dynamics, Inc. (NASDAQ:STLD). Point72 Asset Management had $26 million invested in the company at the end of the quarter. Jim Simons’s Renaissance Technologies also made a $24.8 million investment in the stock during the quarter. The following funds were also among the new STLD investors: Nick Niell’s Arrowgrass Capital Partners, Louis Bacon’s Moore Global Investments, and Bruce Kovner’s Caxton Associates LP.
Let’s now take a look at hedge fund activity in other stocks similar to Steel Dynamics, Inc. (NASDAQ:STLD). We will take a look at Invesco Ltd. (NYSE:IVZ), Lamar Advertising Co (NASDAQ:LAMR), US Foods Holding Corp. (NYSE:USFD), and Apartment Investment and Management Co. (NYSE:AIV). All of these stocks’ market caps are similar to STLD’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| IVZ | 24 | 284167 | -3 |
| LAMR | 22 | 252142 | 3 |
| USFD | 41 | 1206641 | 5 |
| AIV | 21 | 522693 | 3 |
| Average | 27 | 566411 | 2 |
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 $566 million. That figure was $543 million in STLD’s case. US Foods Holding Corp. (NYSE:USFD) is the most popular stock in this table. On the other hand Apartment Investment and Management Co. (NYSE:AIV) is the least popular one with only 21 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. Our calculations showed that the top 15 most popular stocks among hedge funds returned 21.3% year-to-date through April 8th and outperformed the S&P 500 ETF (SPY) by more than 5 percentage points. Hedge funds were also right about betting on STLD, though not to the same extent, as the stock returned 20.1% and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.
