In this article we will take a look at whether hedge funds think Superior Group of Companies, Inc. (NASDAQ:SGC) is a good investment right now. We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, unconventional data sources, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.
Is Superior Group of Companies (SGC) a good stock to buy now? Hedge funds were in an optimistic mood. The number of long hedge fund bets went up by 2 in recent months. Superior Group of Companies, Inc. (NASDAQ:SGC) was in 6 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistics is 5. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that SGC 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).
Video: Watch our video about the top 5 most popular hedge fund stocks.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 S&P 500 ETFs by more than 66 percentage points since March 2017 (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. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
Now we’re going to take a gander at the latest hedge fund action regarding Superior Group of Companies, Inc. (NASDAQ:SGC).
How are hedge funds trading Superior Group of Companies, Inc. (NASDAQ:SGC)?
At Q3’s end, a total of 6 of the hedge funds tracked by Insider Monkey were long this stock, a change of 50% from the previous quarter. By comparison, 4 hedge funds held shares or bullish call options in SGC a year ago. With the smart money’s sentiment swirling, there exists a few noteworthy hedge fund managers who were upping their stakes considerably (or already accumulated large positions).
The largest stake in Superior Group of Companies, Inc. (NASDAQ:SGC) was held by Steamboat Capital Partners, which reported holding $3.5 million worth of stock at the end of September. It was followed by Renaissance Technologies with a $3.2 million position. Other investors bullish on the company included Arrowstreet Capital, Ancora Advisors, and Bailard Inc. In terms of the portfolio weights assigned to each position Steamboat Capital Partners allocated the biggest weight to Superior Group of Companies, Inc. (NASDAQ:SGC), around 0.58% of its 13F portfolio. Ancora Advisors is also relatively very bullish on the stock, dishing out 0.04 percent of its 13F equity portfolio to SGC.
Now, specific money managers were breaking ground themselves. Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, established the most valuable position in Superior Group of Companies, Inc. (NASDAQ:SGC). Arrowstreet Capital had $1.5 million invested in the company at the end of the quarter. Gavin Saitowitz and Cisco J. del Valle’s Prelude Capital (previously Springbok Capital) also initiated a $0 million position during the quarter.
Let’s now review hedge fund activity in other stocks similar to Superior Group of Companies, Inc. (NASDAQ:SGC). These stocks are Fortress Biotech Inc (NASDAQ:FBIO), Bluegreen Vacations Corporation (NYSE:BXG), Cardiff Oncology, Inc. (NASDAQ:CRDF), ShotSpotter, Inc. (NASDAQ:SSTI), Waitr Holdings Inc. (NASDAQ:WTRH), iBio, Inc. (NYSE:IBIO), and The First of Long Island Corporation (NASDAQ:FLIC). This group of stocks’ market valuations match SGC’s market valuation.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 9.4 hedge funds with bullish positions and the average amount invested in these stocks was $40 million. That figure was $10 million in SGC’s case. Cardiff Oncology, Inc. (NASDAQ:CRDF) is the most popular stock in this table. On the other hand iBio, Inc. (NYSE:IBIO) is the least popular one with only 3 bullish hedge fund positions. Superior Group of Companies, Inc. (NASDAQ:SGC) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for SGC is 47.7. 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. This is a slightly negative signal and 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 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 30.7% in 2020 through November 27th and surpassed the market again by 16.1 percentage points. Unfortunately SGC wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); SGC investors were disappointed as the stock returned 0.7% since the end of September (through 11/27) 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 most of these stocks already outperformed the market in 2020.
Disclosure: None. This article was originally published at Insider Monkey.