Before we spend countless hours researching a company, we like to analyze what insiders, hedge funds and billionaire investors think of the stock first. This is a necessary first step in our investment process because our research has shown that the elite investors’ consensus returns have been exceptional. In the following paragraphs, we find out what the billionaire investors and hedge funds think of Simpson Manufacturing Co, Inc. (NYSE:SSD).
Hedge fund interest in Simpson Manufacturing Co, Inc. (NYSE:SSD) shares was flat at the end of last quarter. This is usually a negative indicator. Our calculations also showed that SSD isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings). At the end of this article we will also compare SSD to other stocks including Semtech Corporation (NASDAQ:SMTC), Open Lending Corporation (NASDAQ:LPRO), and Sonos, Inc. (NASDAQ:SONO) to get a better sense of its popularity.
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 115 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, economists warn of inflation flare up. So, we are checking out this backdoor gold play that has hit peak gains of 718% in a little over a year. We go through lists like the 10 best battery 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. Keeping this in mind let’s take a glance at the latest hedge fund action regarding Simpson Manufacturing Co, Inc. (NYSE:SSD).
Do Hedge Funds Think SSD Is A Good Stock To Buy Now?
At the end of the first quarter, a total of 25 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the previous quarter. The graph below displays the number of hedge funds with bullish position in SSD over the last 23 quarters. With the smart money’s positions undergoing their usual ebb and flow, there exists a few noteworthy hedge fund managers who were increasing their holdings meaningfully (or already accumulated large positions).
Among these funds, Ariel Investments held the most valuable stake in Simpson Manufacturing Co, Inc. (NYSE:SSD), which was worth $70.6 million at the end of the fourth quarter. On the second spot was Royce & Associates which amassed $36.5 million worth of shares. Arrowstreet Capital, Citadel Investment Group, and Fisher Asset 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 Potrero Capital Research allocated the biggest weight to Simpson Manufacturing Co, Inc. (NYSE:SSD), around 2.01% of its 13F portfolio. Ariel Investments is also relatively very bullish on the stock, setting aside 0.7 percent of its 13F equity portfolio to SSD.
Because Simpson Manufacturing Co, Inc. (NYSE:SSD) has witnessed a decline in interest from hedge fund managers, we can see that there exists a select few money managers who were dropping their positions entirely in the first quarter. At the top of the heap, Matthew Hulsizer’s PEAK6 Capital Management sold off the largest investment of the “upper crust” of funds watched by Insider Monkey, comprising an estimated $1 million in stock, and David Harding’s Winton Capital Management was right behind this move, as the fund said goodbye to about $0.6 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Simpson Manufacturing Co, Inc. (NYSE:SSD) but similarly valued. These stocks are Semtech Corporation (NASDAQ:SMTC), Open Lending Corporation (NASDAQ:LPRO), Sonos, Inc. (NASDAQ:SONO), Qurate Retail, Inc. (NASDAQ:QRTEA), Home Bancshares, Inc. (Conway, AR) (NASDAQ:HOMB), Inovalon Holdings Inc (NASDAQ:INOV), and Highwoods Properties Inc (NYSE:HIW). This group of stocks’ market valuations are similar to SSD’s market valuation.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 24.9 hedge funds with bullish positions and the average amount invested in these stocks was $362 million. That figure was $239 million in SSD’s case. Sonos, Inc. (NASDAQ:SONO) is the most popular stock in this table. On the other hand Home Bancshares, Inc. (Conway, AR) (NASDAQ:HOMB) is the least popular one with only 6 bullish hedge fund positions. Simpson Manufacturing Co, Inc. (NYSE:SSD) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for SSD is 57.6. 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. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. 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% in 2021 through July 9th and beat the market again by 6.7 percentage points. Unfortunately SSD wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on SSD were disappointed as the stock returned 6.8% since the end of March (through 7/9) 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 many of these stocks already outperformed the market since 2019.
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Disclosure: None. This article was originally published at Insider Monkey.