In this article we will check out the progression of hedge fund sentiment towards Simpson Manufacturing Co, Inc. (NYSE:SSD) and determine whether it is a good investment right now. We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also employ numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.
Simpson Manufacturing Co, Inc. (NYSE:SSD) has experienced a decrease in support from the world’s most elite money managers lately. Simpson Manufacturing Co, Inc. (NYSE:SSD) was in 17 hedge funds’ portfolios at the end of September. The all time high for this statistic is 26. There were 21 hedge funds in our database with SSD positions at the end of the second quarter. Our calculations also showed that SSD isn’t among the 30 most popular stocks among hedge funds (click for Q3 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.
In today’s marketplace there are many tools market participants can use to value publicly traded companies. A duo of the less utilized tools are hedge fund and insider trading interest. We have shown that, historically, those who follow the best picks of the best hedge fund managers can outperform the market by a significant margin (see the details here).
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 recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks 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. Now let’s analyze the recent hedge fund action regarding Simpson Manufacturing Co, Inc. (NYSE:SSD).
Do Hedge Funds Think SSD Is A Good Stock To Buy Now?
Heading into the fourth quarter of 2020, a total of 17 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -19% from one quarter earlier. On the other hand, there were a total of 15 hedge funds with a bullish position in SSD a year ago. With the smart money’s positions undergoing their usual ebb and flow, there exists an “upper tier” of key hedge fund managers who were adding to their stakes meaningfully (or already accumulated large positions).
According to Insider Monkey’s hedge fund database, Ariel Investments, managed by John W. Rogers, holds the largest position in Simpson Manufacturing Co, Inc. (NYSE:SSD). Ariel Investments has a $56.4 million position in the stock, comprising 0.8% of its 13F portfolio. Coming in second is Royce & Associates, managed by Chuck Royce, which holds a $42.2 million position; 0.5% of its 13F portfolio is allocated to the stock. Other professional money managers that are bullish contain Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, Ken Fisher’s Fisher Asset Management and Renaissance Technologies. In terms of the portfolio weights assigned to each position Ariel Investments allocated the biggest weight to Simpson Manufacturing Co, Inc. (NYSE:SSD), around 0.82% of its 13F portfolio. Royce & Associates is also relatively very bullish on the stock, setting aside 0.46 percent of its 13F equity portfolio to SSD.
Seeing as Simpson Manufacturing Co, Inc. (NYSE:SSD) has experienced declining sentiment from the aggregate hedge fund industry, we can see that there exists a select few hedgies that decided to sell off their entire stakes in the third quarter. It’s worth mentioning that Israel Englander’s Millennium Management cut the largest investment of all the hedgies monitored by Insider Monkey, totaling close to $5.3 million in stock. Paul Tudor Jones’s fund, Tudor Investment Corp, also sold off its stock, about $1.3 million worth. These transactions are important to note, as aggregate hedge fund interest dropped by 4 funds in the third quarter.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Simpson Manufacturing Co, Inc. (NYSE:SSD) but similarly valued. We will take a look at Bandwidth Inc. (NASDAQ:BAND), Texas Roadhouse Inc (NASDAQ:TXRH), PennyMac Financial Services Inc (NYSE:PFSI), II-VI, Inc. (NASDAQ:IIVI), OneMain Holdings Inc (NYSE:OMF), MAXIMUS, Inc. (NYSE:MMS), and DouYu International Holdings Limited (NASDAQ:DOYU). This group of stocks’ market caps are similar to SSD’s market cap.
|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 26.4 hedge funds with bullish positions and the average amount invested in these stocks was $285 million. That figure was $188 million in SSD’s case. OneMain Holdings Inc (NYSE:OMF) is the most popular stock in this table. On the other hand Texas Roadhouse Inc (NASDAQ:TXRH) is the least popular one with only 22 bullish hedge fund positions. Compared to these stocks Simpson Manufacturing Co, Inc. (NYSE:SSD) is even less popular than TXRH. Our overall hedge fund sentiment score for SSD is 20.6. 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. Hedge funds dodged a bullet by taking a bearish stance towards SSD. Our calculations showed that the top 20 most popular hedge fund stocks returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 30.7% in 2020 through December 14th but managed to beat the market again by 15.8 percentage points. Unfortunately SSD wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); SSD investors were disappointed as the stock returned -6.4% since the end of the third quarter (through 12/14) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as most of these stocks already outperformed the market so far in 2020.
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Disclosure: None. This article was originally published at Insider Monkey.