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Was The Smart Money Smart About Sculptor Capital Management, Inc. (SCU)?

Hedge funds don’t get the respect they used to get. Nowadays investors prefer passive funds over actively managed funds. One thing they don’t realize is that 100% of the passive funds didn’t see the coronavirus recession coming, but a lot of hedge funds did. Even we published an article near the end of February and predicted a US recession. Think about all the losses you could have avoided if you sold your shares in February and bought them back at the end of March.

In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. We know that hedge funds generate strong, risk-adjusted returns over the long run, therefore imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, smart money 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 (like Peltz’s recent General Electric losses). However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, as the current round of 13F filings has just ended, let’s examine the smart money sentiment towards Sculptor Capital Management, Inc. (NYSE:SCU).

Sculptor Capital Management, Inc. (NYSE:SCU) investors should be aware of an increase in enthusiasm from smart money of late. SCU was in 12 hedge funds’ portfolios at the end of the fourth quarter of 2019. There were 11 hedge funds in our database with SCU holdings at the end of the previous quarter. Our calculations also showed that SCU isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).

Crispin Odey of Odey Asset Management Group

We leave no stone unturned when looking for the next great investment idea. For example, this investor can predict short term winners following earnings announcements with high accuracy, so we check out his stock picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind we’re going to take a gander at the fresh hedge fund action regarding Sculptor Capital Management, Inc. (NYSE:SCU).

How have hedgies been trading Sculptor Capital Management, Inc. (NYSE:SCU)?

At Q4’s end, a total of 12 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 9% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in SCU over the last 18 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, Abrams Capital Management was the largest shareholder of Sculptor Capital Management, Inc. (NYSE:SCU), with a stake worth $45.5 million reported as of the end of September. Trailing Abrams Capital Management was Samlyn Capital, which amassed a stake valued at $11.8 million. Odey Asset Management Group, North Run Capital, and Miller Value Partners 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 North Run Capital allocated the biggest weight to Sculptor Capital Management, Inc. (NYSE:SCU), around 3.65% of its 13F portfolio. Kamunting Street Capital is also relatively very bullish on the stock, setting aside 1.83 percent of its 13F equity portfolio to SCU.

Now, key money managers have jumped into Sculptor Capital Management, Inc. (NYSE:SCU) headfirst. Samlyn Capital, managed by Robert Pohly, created the biggest position in Sculptor Capital Management, Inc. (NYSE:SCU). Samlyn Capital had $11.8 million invested in the company at the end of the quarter. Ken Griffin’s Citadel Investment Group also made a $0.8 million investment in the stock during the quarter. The only other fund with a brand new SCU position is Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital.

Let’s also examine hedge fund activity in other stocks similar to Sculptor Capital Management, Inc. (NYSE:SCU). These stocks are Delphi Technologies PLC (NYSE:DLPH), Callon Petroleum Company (NYSE:CPE), Wesco Aircraft Holdings Inc (NYSE:WAIR), and Stratasys, Ltd. (NASDAQ:SSYS). This group of stocks’ market caps resemble SCU’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
DLPH 17 155844 -4
CPE 27 226348 -2
WAIR 18 166223 -7
SSYS 18 81813 4
Average 20 157557 -2.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 20 hedge funds with bullish positions and the average amount invested in these stocks was $158 million. That figure was $85 million in SCU’s case. Callon Petroleum Company (NYSE:CPE) is the most popular stock in this table. On the other hand Delphi Technologies PLC (NYSE:DLPH) is the least popular one with only 17 bullish hedge fund positions. Compared to these stocks Sculptor Capital Management, Inc. (NYSE:SCU) is even less popular than DLPH. Hedge funds dodged a bullet by taking a bearish stance towards SCU. Our calculations showed that the top 10 most popular hedge fund stocks returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 1.0% in 2020 through May 1st but managed to beat the market by 12.9 percentage points. Unfortunately SCU wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was very bearish); SCU investors were disappointed as the stock returned -34.8% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market so far in 2020.
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

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

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