We know that hedge funds generate strong, risk-adjusted returns over the long run, which is why imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, professional investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do. However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, let’s examine the smart money sentiment towards Silgan Holdings Inc. (NASDAQ:SLGN) and determine whether hedge funds skillfully traded this stock.
Is Silgan Holdings Inc. (NASDAQ:SLGN) a buy right now? The best stock pickers were turning bullish. The number of bullish hedge fund bets moved up by 3 lately. Silgan Holdings Inc. (NASDAQ:SLGN) was in 19 hedge funds’ portfolios at the end of the second quarter of 2020. The all time high for this statistics is 20. Our calculations also showed that SLGN isn’t among the 30 most popular stocks among hedge funds (click for Q2 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.
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 58 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
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 are checking out this junior gold mining stock and we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 10 most profitable companies in the world 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 to get excerpts of these letters in your inbox. With all of this in mind we’re going to go over the new hedge fund action surrounding Silgan Holdings Inc. (NASDAQ:SLGN).
Hedge fund activity in Silgan Holdings Inc. (NASDAQ:SLGN)
Heading into the third quarter of 2020, a total of 19 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 19% from the previous quarter. On the other hand, there were a total of 18 hedge funds with a bullish position in SLGN 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.
The largest stake in Silgan Holdings Inc. (NASDAQ:SLGN) was held by Cardinal Capital, which reported holding $112.5 million worth of stock at the end of September. It was followed by AQR Capital Management with a $30.4 million position. Other investors bullish on the company included Millennium Management, Renaissance Technologies, and Appian Way Asset Management. In terms of the portfolio weights assigned to each position Cardinal Capital allocated the biggest weight to Silgan Holdings Inc. (NASDAQ:SLGN), around 4.7% of its 13F portfolio. Appian Way Asset Management is also relatively very bullish on the stock, setting aside 2.94 percent of its 13F equity portfolio to SLGN.
Now, some big names were breaking ground themselves. Millennium Management, managed by Israel Englander, assembled the most valuable position in Silgan Holdings Inc. (NASDAQ:SLGN). Millennium Management had $11.8 million invested in the company at the end of the quarter. Andrew Byington’s Appian Way Asset Management also made a $5.1 million investment in the stock during the quarter. The other funds with new positions in the stock are Chuck Royce’s Royce & Associates, Michael Gelband’s ExodusPoint Capital, and Matthew Hulsizer’s PEAK6 Capital Management.
Let’s check out hedge fund activity in other stocks similar to Silgan Holdings Inc. (NASDAQ:SLGN). We will take a look at Spirit Realty Capital Inc (NYSE:SRC), United Bankshares, Inc. (NASDAQ:UBSI), Equitrans Midstream Corporation (NYSE:ETRN), Valvoline Inc. (NYSE:VVV), WPX Energy Inc (NYSE:WPX), Terreno Realty Corporation (NYSE:TRNO), and Arena Pharmaceuticals, Inc. (NASDAQ:ARNA). This group of stocks’ market values match SLGN’s market value.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
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As you can see these stocks had an average of 27.1 hedge funds with bullish positions and the average amount invested in these stocks was $339 million. That figure was $183 million in SLGN’s case. Arena Pharmaceuticals, Inc. (NASDAQ:ARNA) is the most popular stock in this table. On the other hand Terreno Realty Corporation (NYSE:TRNO) is the least popular one with only 9 bullish hedge fund positions. Silgan Holdings Inc. (NASDAQ:SLGN) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for SLGN is 52.1. 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 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 24.8% in 2020 through the end of September and still beat the market by 19.3 percentage points. A small number of hedge funds were also right about betting on SLGN as the stock returned 13.9% in the third quarter and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.