Is STRL A Good Stock To Buy Now?

We at Insider Monkey have gone over 817 13F filings that hedge funds and prominent investors are required to file by the SEC The 13F filings show the funds’ and investors’ portfolio positions as of September 30th. In this article, we look at what those funds think of Sterling Construction Company, Inc. (NASDAQ:STRL) based on that data.

Is STRL a good stock to buy now? Hedge fund interest in Sterling Construction Company, Inc. (NASDAQ:STRL) shares was flat at the end of last quarter. This is usually a negative indicator. Our calculations also showed that STRL 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). 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 American Vanguard Corp. (NYSE:AVD), NexTier Oilfield Solutions Inc. (NYSE:NEX), and Select Energy Services, Inc. (NYSE:WTTR) to gather more data points.

Video: Watch our video about the top 5 most popular hedge fund stocks.

To the average investor there are numerous gauges investors put to use to size up publicly traded companies. A couple of the most useful gauges are hedge fund and insider trading interest. Our researchers have shown that, historically, those who follow the top picks of the best money managers can outperform the market by a very impressive margin (see the details here).


Israel Englander of Millennium Management

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks 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. With all of this in mind let’s view the new hedge fund action regarding Sterling Construction Company, Inc. (NASDAQ:STRL).

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

At the end of September, a total of 15 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the second quarter of 2020. Below, you can check out the change in hedge fund sentiment towards STRL over the last 21 quarters. With hedge funds’ capital changing hands, there exists a few key hedge fund managers who were adding to their stakes substantially (or already accumulated large positions).

According to Insider Monkey’s hedge fund database, Renaissance Technologies has the biggest position in Sterling Construction Company, Inc. (NASDAQ:STRL), worth close to $27.5 million, accounting for less than 0.1%% of its total 13F portfolio. The second most bullish fund manager is Israel Englander of Millennium Management, with a $5 million position; less than 0.1%% of its 13F portfolio is allocated to the company. Other professional money managers with similar optimism consist of Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, Nick Thakore’s Diametric Capital and Mark Coe’s Intrinsic Edge Capital. In terms of the portfolio weights assigned to each position Diametric Capital allocated the biggest weight to Sterling Construction Company, Inc. (NASDAQ:STRL), around 2.66% of its 13F portfolio. Intrinsic Edge Capital is also relatively very bullish on the stock, designating 0.2 percent of its 13F equity portfolio to STRL.

Because Sterling Construction Company, Inc. (NASDAQ:STRL) has experienced a decline in interest from the smart money, it’s easy to see that there is a sect of hedge funds who were dropping their full holdings in the third quarter. It’s worth mentioning that Paul Marshall and Ian Wace’s Marshall Wace LLP cut the largest stake of the 750 funds monitored by Insider Monkey, comprising about $0.3 million in stock, and Roger Ibbotson’s Zebra Capital Management was right behind this move, as the fund sold off about $0.1 million worth. These transactions are important to note, as total hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s now take a look at hedge fund activity in other stocks similar to Sterling Construction Company, Inc. (NASDAQ:STRL). We will take a look at American Vanguard Corp. (NYSE:AVD), NexTier Oilfield Solutions Inc. (NYSE:NEX), Select Energy Services, Inc. (NYSE:WTTR), Kosmos Energy Ltd (NYSE:KOS), Tristate Capital Holdings Inc (NASDAQ:TSC), SeaSpine Holdings Corp (NASDAQ:SPNE), and Haverty Furniture Companies, Inc. (NYSE:HVT). This group of stocks’ market caps are closest to STRL’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
AVD 9 7160 -1
NEX 22 142385 -2
WTTR 10 14886 -3
KOS 11 8123 -1
TSC 17 36134 0
SPNE 16 51405 0
HVT 14 52327 3
Average 14.1 44631 -0.6

View table here if you experience formatting issues.

As you can see these stocks had an average of 14.1 hedge funds with bullish positions and the average amount invested in these stocks was $45 million. That figure was $55 million in STRL’s case. NexTier Oilfield Solutions Inc. (NYSE:NEX) is the most popular stock in this table. On the other hand American Vanguard Corp. (NYSE:AVD) is the least popular one with only 9 bullish hedge fund positions. Sterling Construction Company, Inc. (NASDAQ:STRL) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for STRL is 54.5. 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. 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 30.7% in 2020 through December 14th and still beat the market by 15.8 percentage points. Hedge funds were also right about betting on STRL as the stock returned 36.3% since the end of Q3 (through 12/14) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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