The successful funds run by legendary investors such as Dan Loeb and David Tepper make hundreds of millions of dollars for themselves and their investors by spending enormous resources doing research on small cap stocks that big investment banks don’t follow. Because of their pay structures, they have strong incentive to do the research necessary to beat the market. That’s why we pay close attention to what they think in small cap stocks. In this article, we take a closer look at Smith & Nephew plc (ADR) (NYSE:SNN) from the perspective of those successful funds.
Is Smith & Nephew plc (ADR) (NYSE:SNN) worth your attention right now? Prominent investors are altogether in a bullish mood. The number of long hedge fund positions that are disclosed in regulatory 13F filings went up by 1 recently. There were 11 hedge funds in our database with SNN holdings at the end of September. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as CenturyLink, Inc. (NYSE:CTL), Genuine Parts Company (NYSE:GPC), and Mohawk Industries, Inc. (NYSE:MHK) to gather more data points.
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We follow over 700 hedge funds and other institutional investors and by analyzing their quarterly 13F filings, we identify stocks that they are collectively bullish on and develop investment strategies based on this data. One strategy that outperformed the market over the last year involves selecting the 100 best-performing funds and identifying the 30 mid-cap stocks that they are collectively most bullish on. Over the past year, this strategy generated returns of 18%, topping the 8% gain registered by S&P 500 ETFs. We launched this strategy 2.5 years ago and it returned more than 39% since then, vs. 22% gain registered by the S&P 500 ETFs.
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Now, let’s take a glance at the new action surrounding Smith & Nephew plc (ADR) (NYSE:SNN).
What have hedge funds been doing with Smith & Nephew plc (ADR) (NYSE:SNN)?
At the end of the third quarter, a total of 11 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 10% from the second quarter of 2016. Below, you can check out the change in hedge fund sentiment towards SNN over the last 5 quarters. With hedge funds’ positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were boosting their holdings considerably (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, Ken Fisher’s Fisher Asset Management has the number one position in Smith & Nephew plc (ADR) (NYSE:SNN), worth close to $81.3 million, comprising 0.1% of its total 13F portfolio. Coming in second is Arrowstreet Capital, led by Peter Rathjens, Bruce Clarke and John Campbell, which holds a $45.9 million position; 0.1% of its 13F portfolio is allocated to the stock. Other hedge funds and institutional investors that hold long positions encompass Glenn Russell Dubin’s Highbridge Capital Management, Millennium Management, one of the 10 largest hedge funds in the world, and Jim Simons’s Renaissance Technologies. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.
As industrywide interest jumped, some big names have been driving this bullishness. Blue Jay Capital Management, led by Paul Sinclair, created the largest position in Smith & Nephew plc (ADR) (NYSE:SNN). Blue Jay Capital Management had $10.7 million invested in the company at the end of the quarter. Krishen Sud’s Sivik Global Healthcare also made a $2.5 million investment in the stock during the quarter. The only other fund with a brand new SNN position is David Costen Haley’s HBK Investments.
Let’s go over hedge fund activity in other stocks similar to Smith & Nephew plc (ADR) (NYSE:SNN). We will take a look at CenturyLink, Inc. (NYSE:CTL), Genuine Parts Company (NYSE:GPC), Mohawk Industries, Inc. (NYSE:MHK), and Ulta Salon, Cosmetics & Fragrance, Inc. (NASDAQ:ULTA). This group of stocks’ market caps are closest to SNN’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CTL | 29 | 395238 | 1 |
| GPC | 23 | 347677 | 1 |
| MHK | 49 | 2485166 | 2 |
| ULTA | 40 | 2044715 | 4 |
As you can see these stocks had an average of 35.25 hedge funds with bullish positions and the average amount invested in these stocks was $1318 million. That figure was $233 million in SNN’s case. Mohawk Industries, Inc. (NYSE:MHK) is the most popular stock in this table. On the other hand Genuine Parts Company (NYSE:GPC) is the least popular one with only 23 bullish hedge fund positions. Compared to these stocks Smith & Nephew plc (ADR) (NYSE:SNN) is even less popular than GPC. Considering that hedge funds aren’t fond of this stock in relation to other companies analyzed in this article, it may be a good idea to analyze it in detail and understand why the smart money isn’t behind this stock. This isn’t necessarily bad news. Although it is possible that hedge funds may think the stock is overpriced and view the stock as a short candidate, they may not be very familiar with the bullish thesis. In either case more research is warranted.
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Disclosure: None
