Many prominent investors, including Warren Buffett, David Tepper and Stan Druckenmiller, have been cautious regarding the current bull market and missed out as the stock market reached another high in recent weeks. On the other hand, technology hedge funds weren’t timid and registered double digit market beating gains. Financials, energy and industrial stocks aren’t doing great but many of the stocks that delivered strong returns since March are still going very strong and hedge funds actually increased their positions in these stocks. In this article we will find out how hedge fund sentiment to Standex International Corp. (NYSE:SXI) changed recently.
Is SXI a good stock to buy now? The smart money was turning less bullish. The number of bullish hedge fund positions were cut by 1 in recent months. Standex International Corp. (NYSE:SXI) was in 11 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistics is 16. Our calculations also showed that SXI 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.
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 we’re going to view the new hedge fund action surrounding Standex International Corp. (NYSE:SXI).
Do Hedge Funds Think SXI Is A Good Stock To Buy Now?
Heading into the fourth quarter of 2020, a total of 11 of the hedge funds tracked by Insider Monkey were long this stock, a change of -8% from one quarter earlier. On the other hand, there were a total of 16 hedge funds with a bullish position in SXI a year ago. With hedgies’ sentiment swirling, there exists a select group of notable hedge fund managers who were adding to their stakes considerably (or already accumulated large positions).
According to Insider Monkey’s hedge fund database, Cove Street Capital, managed by Jeffrey Bronchick, holds the number one position in Standex International Corp. (NYSE:SXI). Cove Street Capital has a $12.2 million position in the stock, comprising 2.3% of its 13F portfolio. The second largest stake is held by Barington Capital Group, led by James A. Mitarotonda, holding a $7.2 million position; the fund has 12.5% of its 13F portfolio invested in the stock. Some other professional money managers with similar optimism include Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, Mario Gabelli’s GAMCO Investors and Cliff Asness’s AQR Capital Management. In terms of the portfolio weights assigned to each position Barington Capital Group allocated the biggest weight to Standex International Corp. (NYSE:SXI), around 12.54% of its 13F portfolio. Cove Street Capital is also relatively very bullish on the stock, dishing out 2.31 percent of its 13F equity portfolio to SXI.
Since Standex International Corp. (NYSE:SXI) has experienced bearish sentiment from the entirety of the hedge funds we track, logic holds that there was a specific group of fund managers that decided to sell off their positions entirely by the end of the third quarter. At the top of the heap, Paul Marshall and Ian Wace’s Marshall Wace LLP said goodbye to the largest position of all the hedgies tracked by Insider Monkey, totaling an estimated $0.3 million in stock, and Chuck Royce’s Royce & Associates was right behind this move, as the fund said goodbye to about $0 million worth. These transactions are interesting, as total hedge fund interest fell by 1 funds by the end of the third quarter.
Let’s now take a look at hedge fund activity in other stocks similar to Standex International Corp. (NYSE:SXI). These stocks are TriCo Bancshares (NASDAQ:TCBK), Tucows Inc. (NASDAQ:TCX), Meridian Bioscience, Inc. (NASDAQ:VIVO), Armada Hoffler Properties Inc (NYSE:AHH), Vaxart, Inc. (NASDAQ:VXRT), OneSmart International Education Group Limited (NYSE:ONE), and Provention Bio, Inc. (NASDAQ:PRVB). This group of stocks’ market valuations match SXI’s market valuation.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
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As you can see these stocks had an average of 13 hedge funds with bullish positions and the average amount invested in these stocks was $85 million. That figure was $35 million in SXI’s case. OneSmart International Education Group Limited (NYSE:ONE) is the most popular stock in this table. On the other hand Tucows Inc. (NASDAQ:TCX) is the least popular one with only 8 bullish hedge fund positions. Standex International Corp. (NYSE:SXI) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for SXI is 37.1. 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 32.9% in 2020 through December 8th and still beat the market by 16.2 percentage points. A small number of hedge funds were also right about betting on SXI as the stock returned 34.9% since the end of the third quarter (through 12/8) and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.