Were Hedge Funds Right About U.S. Silica Holdings Inc (SLCA)?

With the first-quarter round of 13F filings behind us it is time to take a look at the stocks in which some of the best money managers in the world preferred to invest or sell heading into the second quarter of 2021. One of these stocks was U.S. Silica Holdings Inc (NYSE:SLCA).

U.S. Silica Holdings Inc (NYSE:SLCA) investors should be aware of an increase in enthusiasm from smart money recently. U.S. Silica Holdings Inc (NYSE:SLCA) was in 18 hedge funds’ portfolios at the end of the first quarter of 2021. The all time high for this statistic is 43. There were 17 hedge funds in our database with SLCA holdings at the end of December. Our calculations also showed that SLCA isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 206.8% since March 2017 and outperformed the S&P 500 ETFs by more than 115 percentage points (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Peter Rathjens Arrowstreet Capital 394

Peter Rathjens of Arrowstreet Capital

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, pet market is growing at a 7% annual rate and is expected to reach $110 billion in 2021. So, we are checking out the 5 best stocks for animal lovers. We go through lists like the 15 best Jim Cramer stocks to identify the next Tesla that will deliver outsized returns. 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. With all of this in mind let’s take a glance at the recent hedge fund action encompassing U.S. Silica Holdings Inc (NYSE:SLCA).

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

At Q1’s end, a total of 18 of the hedge funds tracked by Insider Monkey were long this stock, a change of 6% from the previous quarter. By comparison, 12 hedge funds held shares or bullish call options in SLCA a year ago. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is SLCA A Good Stock To Buy?

When looking at the institutional investors followed by Insider Monkey, Ariel Investments, managed by John W. Rogers, holds the most valuable position in U.S. Silica Holdings Inc (NYSE:SLCA). Ariel Investments has a $64.7 million position in the stock, comprising 0.6% of its 13F portfolio. The second largest stake is held by Renaissance Technologies, holding a $59.8 million position; 0.1% of its 13F portfolio is allocated to the company. Some other peers with similar optimism contain D. E. Shaw’s D E Shaw, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital and Chuck Royce’s Royce & Associates. In terms of the portfolio weights assigned to each position ACK Asset Management allocated the biggest weight to U.S. Silica Holdings Inc (NYSE:SLCA), around 2.97% of its 13F portfolio. Precept Capital Management is also relatively very bullish on the stock, setting aside 0.84 percent of its 13F equity portfolio to SLCA.

Consequently, specific money managers were breaking ground themselves. D E Shaw, managed by D. E. Shaw, initiated the most valuable call position in U.S. Silica Holdings Inc (NYSE:SLCA). D E Shaw had $2.7 million invested in the company at the end of the quarter. Blair Baker’s Precept Capital Management also initiated a $1.2 million position during the quarter. The following funds were also among the new SLCA investors: Cliff Asness’s AQR Capital Management, Donald Sussman’s Paloma Partners, and Greg Eisner’s Engineers Gate Manager.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as U.S. Silica Holdings Inc (NYSE:SLCA) but similarly valued. We will take a look at Golden Nugget Online Gaming, Inc. (NASDAQ:GNOG), CM Life Sciences, Inc. (NASDAQ:CMLFU), Bryn Mawr Bank Corp. (NASDAQ:BMTC), Tellurian Inc. (NASDAQ:TELL), National Western Life Group Inc. (NASDAQ:NWLI), Oric Pharmaceuticals, Inc. (NASDAQ:ORIC), and Apollo Investment Corp. (NASDAQ:AINV). This group of stocks’ market valuations are closest to SLCA’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
GNOG 10 34611 -6
CMLFU 6 37392 -6
BMTC 12 46863 -5
TELL 12 28482 5
NWLI 8 13057 1
ORIC 13 259300 -1
AINV 11 39349 1
Average 10.3 65579 -1.6

View table here if you experience formatting issues.

As you can see these stocks had an average of 10.3 hedge funds with bullish positions and the average amount invested in these stocks was $66 million. That figure was $191 million in SLCA’s case. Oric Pharmaceuticals, Inc. (NASDAQ:ORIC) is the most popular stock in this table. On the other hand CM Life Sciences, Inc. (NASDAQ:CMLFU) is the least popular one with only 6 bullish hedge fund positions. Compared to these stocks U.S. Silica Holdings Inc (NYSE:SLCA) is more popular among hedge funds. Our overall hedge fund sentiment score for SLCA is 68.6. 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 28.5% in 2021 through July 23rd and still beat the market by 10.1 percentage points. Unfortunately SLCA wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on SLCA were disappointed as the stock returned -19.4% since the end of the first quarter (through 7/23) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market since 2019.

Follow U.s. Silica Holdings Inc. (NYSE:SLCA)

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