Should I Buy Stantec Inc. (STN)?

Most investors tend to think that hedge funds and other asset managers are worthless, as they cannot beat even simple index fund portfolios. In fact, most people expect hedge funds to compete with and outperform the bull market that we have witnessed in recent years. However, hedge funds are generally partially hedged and aim at delivering attractive risk-adjusted returns rather than following the ups and downs of equity markets hoping that they will outperform the broader market. Our research shows that certain hedge funds do have great stock picking skills (and we can identify these hedge funds in advance pretty accurately), so let’s take a glance at the smart money sentiment towards Stantec Inc. (NYSE:STN).

Stantec Inc. (NYSE:STN) investors should be aware of an increase in enthusiasm from smart money of late. Stantec Inc. (NYSE:STN) was in 10 hedge funds’ portfolios at the end of the second quarter of 2021. The all time high for this statistic is 12. There were 9 hedge funds in our database with STN holdings at the end of March. Our calculations also showed that STN isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).

If you’d ask most traders, hedge funds are perceived as underperforming, outdated financial vehicles of yesteryear. While there are over 8000 funds trading at the moment, We hone in on the elite of this group, about 850 funds. It is estimated that this group of investors handle the lion’s share of the hedge fund industry’s total asset base, and by shadowing their unrivaled picks, Insider Monkey has uncovered a few investment strategies that have historically outperformed the S&P 500 index. Insider Monkey’s flagship short hedge fund strategy exceeded the S&P 500 short ETFs by around 20 percentage points per year since its inception in March 2017. Also, our monthly newsletter’s portfolio of long stock picks returned 185.4% since March 2017 (through August 2021) and beat the S&P 500 Index by more than 79 percentage points. You can download a sample issue of this newsletter on our website .

Donald Sussman Paloma Partners

Donald Sussman of Paloma Partners

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. 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 homepage. Keeping this in mind let’s take a peek at the fresh hedge fund action encompassing Stantec Inc. (NYSE:STN).

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

At Q2’s end, a total of 10 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 11% from the first quarter of 2020. On the other hand, there were a total of 5 hedge funds with a bullish position in STN a year ago. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in Stantec Inc. (NYSE:STN) was held by Renaissance Technologies, which reported holding $23.3 million worth of stock at the end of June. It was followed by Arrowstreet Capital with a $12.2 million position. Other investors bullish on the company included Two Sigma Advisors, GLG Partners, and Millennium Management. In terms of the portfolio weights assigned to each position Renaissance Technologies allocated the biggest weight to Stantec Inc. (NYSE:STN), around 0.03% of its 13F portfolio. PDT Partners is also relatively very bullish on the stock, earmarking 0.03 percent of its 13F equity portfolio to STN.

With a general bullishness amongst the heavyweights, some big names have been driving this bullishness. GLG Partners, managed by Noam Gottesman, created the largest position in Stantec Inc. (NYSE:STN). GLG Partners had $2.1 million invested in the company at the end of the quarter. Paul Marshall and Ian Wace’s Marshall Wace LLP also made a $0.4 million investment in the stock during the quarter. The only other fund with a brand new STN position is Donald Sussman’s Paloma Partners.

Let’s go over hedge fund activity in other stocks similar to Stantec Inc. (NYSE:STN). These stocks are Power Integrations Inc (NASDAQ:POWI), Revolve Group, Inc. (NYSE:RVLV), Spirit AeroSystems Holdings, Inc. (NYSE:SPR), Red Rock Resorts, Inc. (NASDAQ:RRR), Atotech Limited (NYSE:ATC), VIZIO Holding Corp. (NYSE:VZIO), and Antero Midstream Corp (NYSE:AM). This group of stocks’ market caps are similar to STN’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
POWI 21 138778 3
RVLV 22 211498 -7
SPR 35 853789 -9
RRR 26 658230 -2
ATC 23 82518 6
VZIO 19 128239 0
AM 16 106977 -1
Average 23.1 311433 -1.4

View table here if you experience formatting issues.

As you can see these stocks had an average of 23.1 hedge funds with bullish positions and the average amount invested in these stocks was $311 million. That figure was $46 million in STN’s case. Spirit AeroSystems Holdings, Inc. (NYSE:SPR) is the most popular stock in this table. On the other hand Antero Midstream Corp (NYSE:AM) is the least popular one with only 16 bullish hedge fund positions. Compared to these stocks Stantec Inc. (NYSE:STN) is even less popular than AM. Our overall hedge fund sentiment score for STN is 31. 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. Hedge funds clearly dropped the ball on STN as the stock delivered strong returns, though hedge funds’ consensus picks still generated respectable returns. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 25.7% in 2021 through September 27th and still beat the market by 6.2 percentage points. A small number of hedge funds were also right about betting on STN as the stock returned 8.3% since Q2 (through September 27th) and outperformed the market by an even larger margin.

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