Is Stoneridge, Inc. (NYSE:SRI) a good equity to bet on right now? We like to check what the smart money thinks first before doing extensive research. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It’s not surprising given that hedge funds have access to better information and more resources to find the winners in the stock market.
Stoneridge, Inc. (NYSE:SRI) has experienced a decrease in support from the world’s most elite money managers recently. SRI was in 15 hedge funds’ portfolios at the end of the fourth quarter of 2018. There were 18 hedge funds in our database with SRI positions at the end of the previous quarter. Our calculations also showed that SRI isn’t among the 30 most popular stocks among hedge funds.
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 has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the market by 32 percentage points since May 2014 through March 12, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
Let’s view the recent hedge fund action surrounding Stoneridge, Inc. (NYSE:SRI).
Hedge fund activity in Stoneridge, Inc. (NYSE:SRI)
At the end of the fourth quarter, a total of 15 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -17% from the second quarter of 2018. Below, you can check out the change in hedge fund sentiment towards SRI over the last 14 quarters. With hedgies’ positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were adding to their stakes significantly (or already accumulated large positions).
More specifically, Royce & Associates was the largest shareholder of Stoneridge, Inc. (NYSE:SRI), with a stake worth $19.3 million reported as of the end of December. Trailing Royce & Associates was Renaissance Technologies, which amassed a stake valued at $16 million. Private Capital Management, GAMCO Investors, and AQR Capital Management were also very fond of the stock, giving the stock large weights in their portfolios.
Due to the fact that Stoneridge, Inc. (NYSE:SRI) has witnessed declining sentiment from the aggregate hedge fund industry, it’s easy to see that there lies a certain “tier” of fund managers who sold off their positions entirely heading into Q3. Intriguingly, Peter S. Park’s Park West Asset Management dumped the largest position of the “upper crust” of funds watched by Insider Monkey, totaling about $6.7 million in stock. Alexander Mitchell’s fund, Scopus Asset Management, also said goodbye to its stock, about $4.8 million worth. These moves are interesting, as total hedge fund interest dropped by 3 funds heading into Q3.
Let’s go over hedge fund activity in other stocks similar to Stoneridge, Inc. (NYSE:SRI). We will take a look at Community Trust Bancorp, Inc. (NASDAQ:CTBI), American Outdoor Brands Corporation (NASDAQ:AOBC), FARO Technologies, Inc. (NASDAQ:FARO), and SunPower Corporation (NASDAQ:SPWR). This group of stocks’ market caps resemble SRI’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CTBI | 7 | 16240 | -2 |
| AOBC | 14 | 109405 | -5 |
| FARO | 8 | 38980 | -4 |
| SPWR | 8 | 24056 | -2 |
| Average | 9.25 | 47170 | -3.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 9.25 hedge funds with bullish positions and the average amount invested in these stocks was $47 million. That figure was $71 million in SRI’s case. American Outdoor Brands Corporation (NASDAQ:AOBC) is the most popular stock in this table. On the other hand Community Trust Bancorp, Inc. (NASDAQ:CTBI) is the least popular one with only 7 bullish hedge fund positions. Compared to these stocks Stoneridge, Inc. (NYSE:SRI) is more popular among hedge funds. Our calculations showed that top 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. Hedge funds were also right about betting on SRI as the stock returned 29.7% and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.
Disclosure: None. This article was originally published at Insider Monkey.
