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Is U.S. Silica Holdings Inc (SLCA) Going To Burn These Hedge Funds ?

We are still in an overall bull market and many stocks that smart money investors were piling into surged through October 17th. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 45% and 39% respectively. Hedge funds’ top 3 stock picks returned 34.4% this year and beat the S&P 500 ETFs by 13 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like U.S. Silica Holdings Inc (NYSE:SLCA).

Is U.S. Silica Holdings Inc (NYSE:SLCA) a buy, sell, or hold? Investors who are in the know are in a bullish mood. The number of long hedge fund positions went up by 3 in recent months. Our calculations also showed that SLCA isn’t among the 30 most popular stocks among hedge funds (see the video below).
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

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’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 25.7% through September 30, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

John Rogers Ariel Investments

Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. Let’s go over the recent hedge fund action surrounding U.S. Silica Holdings Inc (NYSE:SLCA).

What does smart money think about U.S. Silica Holdings Inc (NYSE:SLCA)?

At the end of the second quarter, a total of 17 of the hedge funds tracked by Insider Monkey were long this stock, a change of 21% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards SLCA over the last 16 quarters. With the smart money’s sentiment swirling, there exists a select group of notable hedge fund managers who were upping their stakes considerably (or already accumulated large positions).

No of Hedge Funds with SLCA Positions

When looking at the institutional investors followed by Insider Monkey, John W. Rogers’s Ariel Investments has the largest position in U.S. Silica Holdings Inc (NYSE:SLCA), worth close to $153.1 million, comprising 1.9% of its total 13F portfolio. Coming in second is Rima Senvest Management, led by Richard Mashaal, holding a $52 million position; 4.6% of its 13F portfolio is allocated to the stock. Remaining peers that are bullish comprise Ken Grossman and Glen Schneider’s SG Capital Management, Phil Frohlich’s Prescott Group Capital Management and Israel Englander’s Millennium Management.

Consequently, some big names were breaking ground themselves. Millennium Management, managed by Israel Englander, established the most outsized call position in U.S. Silica Holdings Inc (NYSE:SLCA). Millennium Management had $10.9 million invested in the company at the end of the quarter. David Harding’s Winton Capital Management also initiated a $5.4 million position during the quarter. The other funds with new positions in the stock are Israel Englander’s Millennium Management, D. E. Shaw’s D E Shaw, and Hoon Kim’s Quantinno Capital.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as U.S. Silica Holdings Inc (NYSE:SLCA) but similarly valued. These stocks are DMC Global Inc. (NASDAQ:BOOM), National Western Life Group, Inc. (NASDAQ:NWLI), The Greenbrier Companies, Inc. (NYSE:GBX), and Pacific Biosciences of California, Inc. (NASDAQ:PACB). All of these stocks’ market caps are closest to SLCA’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
BOOM 20 103621 6
NWLI 8 17676 -1
GBX 14 19968 3
PACB 22 155804 3
Average 16 74267 2.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 16 hedge funds with bullish positions and the average amount invested in these stocks was $74 million. That figure was $282 million in SLCA’s case. Pacific Biosciences of California, Inc. (NASDAQ:PACB) is the most popular stock in this table. On the other hand National Western Life Group, Inc. (NASDAQ:NWLI) is the least popular one with only 8 bullish hedge fund positions. U.S. Silica Holdings Inc (NYSE:SLCA) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but 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 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately SLCA wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on SLCA were disappointed as the stock returned -24.8% during the third quarter 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 many of these stocks already outperformed the market so far this year.

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

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