Is ST A Good Stock To Buy According To Hedge Funds?

The 800+ hedge funds and famous money managers tracked by Insider Monkey have already compiled and submitted their 13F filings for the third quarter, which unveil their equity positions as of September 30. We went through these filings, fixed typos and other more significant errors and identified the changes in hedge fund portfolios. Our extensive review of these public filings is finally over, so this article is set to reveal the smart money sentiment towards Sensata Technologies Holding plc (NYSE:ST).

Is ST a good stock to buy? Sensata Technologies Holding plc (NYSE:ST) has seen an increase in enthusiasm from smart money lately. Sensata Technologies Holding plc (NYSE:ST) was in 37 hedge funds’ portfolios at the end of September. The all time high for this statistic is 33. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. There were 33 hedge funds in our database with ST holdings at the end of June. Our calculations also showed that ST 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.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Ric Dillon Diamond Hill Capital

Ric Dillon of Diamond Hill Capital

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, the House passed a landmark bill decriminalizing marijuana. So, we are checking out this under the radar cannabis stock right now. We go through lists like the 15 best blue chip stocks to buy 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. Keeping this in mind let’s analyze the key hedge fund action regarding Sensata Technologies Holding plc (NYSE:ST).

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

At Q3’s end, a total of 37 of the hedge funds tracked by Insider Monkey were long this stock, a change of 12% from the second quarter of 2020. By comparison, 23 hedge funds held shares or bullish call options in ST a year ago. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, David Blood and Al Gore’s Generation Investment Management has the most valuable position in Sensata Technologies Holding plc (NYSE:ST), worth close to $534.8 million, accounting for 2.8% of its total 13F portfolio. The second most bullish fund manager is Phill Gross and Robert Atchinson of Adage Capital Management, with a $251 million position; the fund has 0.6% of its 13F portfolio invested in the stock. Other professional money managers that hold long positions contain Ric Dillon’s Diamond Hill Capital, William B. Gray’s Orbis Investment Management and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital. In terms of the portfolio weights assigned to each position Generation Investment Management allocated the biggest weight to Sensata Technologies Holding plc (NYSE:ST), around 2.84% of its 13F portfolio. Goodnow Investment Group is also relatively very bullish on the stock, earmarking 2.11 percent of its 13F equity portfolio to ST.

With a general bullishness amongst the heavyweights, specific money managers were leading the bulls’ herd. Select Equity Group, managed by Robert Joseph Caruso, established the largest position in Sensata Technologies Holding plc (NYSE:ST). Select Equity Group had $62.9 million invested in the company at the end of the quarter. Dmitry Balyasny’s Balyasny Asset Management also made a $16 million investment in the stock during the quarter. The other funds with brand new ST positions are Richard SchimeláandáLawrence Sapanski’s Cinctive Capital Management, Michael Rockefeller and KarláKroeker’s Woodline Partners, and Christopher James’s Partner Fund Management.

Let’s now review hedge fund activity in other stocks similar to Sensata Technologies Holding plc (NYSE:ST). These stocks are Pan American Silver Corp. (NASDAQ:PAAS), ADT Inc. (NYSE:ADT), Acceleron Pharma Inc (NASDAQ:XLRN), Dunkin Brands Group Inc (NASDAQ:DNKN), LHC Group, Inc. (NASDAQ:LHCG), AECOM (NYSE:ACM), and Aramark (NYSE:ARMK). All of these stocks’ market caps match ST’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
PAAS 28 498359 0
ADT 30 267878 10
XLRN 34 1111306 -14
DNKN 26 246077 -9
LHCG 17 78396 -13
ACM 39 785085 1
ARMK 40 881207 6
Average 30.6 552615 -2.7

View table here if you experience formatting issues.

As you can see these stocks had an average of 30.6 hedge funds with bullish positions and the average amount invested in these stocks was $553 million. That figure was $1470 million in ST’s case. Aramark (NYSE:ARMK) is the most popular stock in this table. On the other hand LHC Group, Inc. (NASDAQ:LHCG) is the least popular one with only 17 bullish hedge fund positions. Sensata Technologies Holding plc (NYSE:ST) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for ST is 82.5. 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 33.3% in 2020 through December 18th and still beat the market by 16.4 percentage points. Hedge funds were also right about betting on ST as the stock returned 17.3% since the end of Q3 (through 12/18) 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.