Should I Buy Steel Dynamics, Inc. (STLD)?

Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the second quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 6 years and analyze what the smart money thinks of Steel Dynamics, Inc. (NASDAQ:STLD) based on that data.

Hedge fund interest in Steel Dynamics, Inc. (NASDAQ:STLD) shares was flat at the end of last quarter. This is usually a negative indicator. Our calculations also showed that STLD isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings). At the end of this article we will also compare STLD to other stocks including Fidelity National Financial Inc (NYSE:FNF), Atmos Energy Corporation (NYSE:ATO), and Guardant Health, Inc. (NASDAQ:GH) to get a better sense of its popularity.

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 79 percentage points since March 2017 (see the details here). That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

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. Now let’s view the latest hedge fund action surrounding Steel Dynamics, Inc. (NASDAQ:STLD).

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

At the end of June, a total of 26 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards STLD over the last 24 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, Citadel Investment Group was the largest shareholder of Steel Dynamics, Inc. (NASDAQ:STLD), with a stake worth $149 million reported as of the end of June. Trailing Citadel Investment Group was D E Shaw, which amassed a stake valued at $139.7 million. Millennium Management, Balyasny Asset Management, and AQR Capital Management 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 Highline Capital Management allocated the biggest weight to Steel Dynamics, Inc. (NASDAQ:STLD), around 7.23% of its 13F portfolio. Infini Capital is also relatively very bullish on the stock, earmarking 0.49 percent of its 13F equity portfolio to STLD.

Because Steel Dynamics, Inc. (NASDAQ:STLD) has witnessed bearish sentiment from the aggregate hedge fund industry, logic holds that there is a sect of money managers that elected to cut their entire stakes heading into Q3. It’s worth mentioning that Clint Murray’s Lodge Hill Capital dumped the largest investment of all the hedgies watched by Insider Monkey, totaling an estimated $13.7 million in stock. Renaissance Technologies, also dropped its stock, about $7 million worth. These bearish behaviors are interesting, as total hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s now take a look at hedge fund activity in other stocks similar to Steel Dynamics, Inc. (NASDAQ:STLD). We will take a look at Fidelity National Financial Inc (NYSE:FNF), Atmos Energy Corporation (NYSE:ATO), Guardant Health, Inc. (NASDAQ:GH), The Boston Beer Company Inc (NYSE:SAM), American Homes 4 Rent (NYSE:AMH), Allegion plc (NYSE:ALLE), and Universal Health Services, Inc. (NYSE:UHS). This group of stocks’ market caps match STLD’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 36 hedge funds with bullish positions and the average amount invested in these stocks was $959 million. That figure was $538 million in STLD’s case. Guardant Health, Inc. (NASDAQ:GH) is the most popular stock in this table. On the other hand Atmos Energy Corporation (NYSE:ATO) is the least popular one with only 18 bullish hedge fund positions. Steel Dynamics, Inc. (NASDAQ:STLD) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for STLD is 36.5. 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 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 24.9% in 2021 through October 15th and still beat the market by 4.5 percentage points. A small number of hedge funds were also right about betting on STLD as the stock returned 4.3% since the end of the second quarter (through 10/15) and outperformed the market by an even larger margin.

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