Should I Avoid Star Bulk Carriers Corp. (SBLK)?

Out of thousands of stocks that are currently traded on the market, it is difficult to identify those that will really generate strong returns. Hedge funds and institutional investors spend millions of dollars on analysts with MBAs and PhDs, who are industry experts and well connected to other industry and media insiders on top of that. Individual investors can piggyback the hedge funds employing these talents and can benefit from their vast resources and knowledge in that way. We analyze quarterly 13F filings of nearly 817 hedge funds and, by looking at the smart money sentiment that surrounds a stock, we can determine whether it has the potential to beat the market over the long-term. Therefore, let’s take a closer look at what smart money thinks about Star Bulk Carriers Corp. (NASDAQ:SBLK).

Is Star Bulk Carriers Corp. (NASDAQ:SBLK) undervalued? The smart money was getting less bullish. The number of bullish hedge fund bets shrunk by 2 in recent months. Star Bulk Carriers Corp. (NASDAQ:SBLK) was in 5 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistics is 19. Our calculations also showed that SBLK 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). There were 7 hedge funds in our database with SBLK positions at the end of the second quarter.

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

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 113% since March 2017 and outperformed the S&P 500 ETFs by more than 66 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Jack Ripsteen Tim Ripsteen Potrero Capital

Jack Ripsteen of Potrero Capital Research

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. Now we’re going to analyze the fresh hedge fund action encompassing Star Bulk Carriers Corp. (NASDAQ:SBLK).

What does smart money think about Star Bulk Carriers Corp. (NASDAQ:SBLK)?

At the end of September, a total of 5 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -29% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards SBLK over the last 21 quarters. With hedge funds’ sentiment swirling, there exists a few key hedge fund managers who were upping their holdings substantially (or already accumulated large positions).

Among these funds, Oaktree Capital Management held the most valuable stake in Star Bulk Carriers Corp. (NASDAQ:SBLK), which was worth $268.8 million at the end of the third quarter. On the second spot was Impala Asset Management which amassed $20.6 million worth of shares. Renaissance Technologies, Arrowstreet Capital, and Potrero Capital Research were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Oaktree Capital Management allocated the biggest weight to Star Bulk Carriers Corp. (NASDAQ:SBLK), around 5.86% of its 13F portfolio. Impala Asset Management is also relatively very bullish on the stock, setting aside 2.08 percent of its 13F equity portfolio to SBLK.

Since Star Bulk Carriers Corp. (NASDAQ:SBLK) has witnessed falling interest from the aggregate hedge fund industry, it’s safe to say that there is a sect of hedge funds that slashed their entire stakes in the third quarter. It’s worth mentioning that Israel Englander’s Millennium Management dumped the biggest position of the “upper crust” of funds monitored by Insider Monkey, comprising an estimated $2 million in stock, and Paul Marshall and Ian Wace’s Marshall Wace LLP was right behind this move, as the fund sold off about $0.2 million worth. These moves are important to note, as total hedge fund interest fell by 2 funds in the third quarter.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Star Bulk Carriers Corp. (NASDAQ:SBLK) but similarly valued. These stocks are Noble Midstream Partners LP (NASDAQ:NBLX), VBI Vaccines, Inc. (NASDAQ:VBIV), SMART Global Holdings, Inc. (NASDAQ:SGH), Heritage Financial Corporation (NASDAQ:HFWA), Westlake Chemical Partners LP (NYSE:WLKP), Third Point Reinsurance Ltd (NYSE:TPRE), and Maverix Metals Inc. (NYSE:MMX). This group of stocks’ market caps are similar to SBLK’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
NBLX 1 1820 0
VBIV 11 191461 1
SGH 14 287640 0
HFWA 6 14208 -1
WLKP 2 1933 -2
TPRE 19 29902 1
MMX 8 91332 3
Average 8.7 88328 0.3

View table here if you experience formatting issues.

As you can see these stocks had an average of 8.7 hedge funds with bullish positions and the average amount invested in these stocks was $88 million. That figure was $304 million in SBLK’s case. Third Point Reinsurance Ltd (NYSE:TPRE) is the most popular stock in this table. On the other hand Noble Midstream Partners LP (NASDAQ:NBLX) is the least popular one with only 1 bullish hedge fund positions. Star Bulk Carriers Corp. (NASDAQ:SBLK) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for SBLK is 22. 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 November 27th and still beat the market by 16.1 percentage points. A small number of hedge funds were also right about betting on SBLK as the stock returned 11.8% since the end of the third quarter (through 11/27) and outperformed the market by an even larger margin.

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