Where Do Hedge Funds Stand On Steel Dynamics, Inc. (STLD)?

In this article you are going to find out whether hedge funds think Steel Dynamics, Inc. (NASDAQ:STLD) is a good investment right now. We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It’s not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.

Steel Dynamics, Inc. (NASDAQ:STLD) has seen a decrease in hedge fund sentiment lately. Steel Dynamics, Inc. (NASDAQ:STLD) was in 26 hedge funds’ portfolios at the end of March. The all time high for this statistic is 42. Our calculations also showed that STLD isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).

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. Hedge funds have more than $3.5 trillion in assets under management, so you can’t expect their entire portfolios to beat the market by large margins. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 115 percentage points since March 2017 (see the details here). So you can still find a lot of gems by following hedge funds’ moves today.

Stan Druckenmiller DUQUESNE CAPITAL

Stanley Druckenmiller of Duquesne Capital

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. With all of this in mind we’re going to take a gander at the recent hedge fund action encompassing Steel Dynamics, Inc. (NASDAQ:STLD).

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

At Q1’s end, a total of 26 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -4% from the fourth quarter of 2020. On the other hand, there were a total of 27 hedge funds with a bullish position in STLD 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.

Of the funds tracked by Insider Monkey, Ken Griffin’s Citadel Investment Group has the largest position in Steel Dynamics, Inc. (NASDAQ:STLD), worth close to $177.5 million, accounting for less than 0.1%% of its total 13F portfolio. The second largest stake is held by D E Shaw, led by D. E. Shaw, holding a $135 million position; the fund has 0.1% of its 13F portfolio invested in the stock. Some other peers with similar optimism comprise Israel Englander’s Millennium Management, Cliff Asness’s AQR Capital Management and Dmitry Balyasny’s Balyasny Asset Management. In terms of the portfolio weights assigned to each position Lodge Hill Capital allocated the biggest weight to Steel Dynamics, Inc. (NASDAQ:STLD), around 5.39% of its 13F portfolio. Sandler Capital Management is also relatively very bullish on the stock, earmarking 0.52 percent of its 13F equity portfolio to STLD.

Judging by the fact that Steel Dynamics, Inc. (NASDAQ:STLD) has faced declining sentiment from the aggregate hedge fund industry, logic holds that there is a sect of money managers that slashed their positions entirely by the end of the first quarter. At the top of the heap, Kerr Neilson’s Platinum Asset Management dumped the largest position of the “upper crust” of funds watched by Insider Monkey, comprising about $32.7 million in stock, and John Overdeck and David Siegel’s Two Sigma Advisors was right behind this move, as the fund said goodbye to about $5.9 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest fell by 1 funds by the end of the first quarter.

Let’s also examine hedge fund activity in other stocks similar to Steel Dynamics, Inc. (NASDAQ:STLD). We will take a look at Five Below Inc (NASDAQ:FIVE), Iron Mountain Incorporated (NYSE:IRM), Repligen Corporation (NASDAQ:RGEN), Trex Company, Inc. (NYSE:TREX), CBOE Global Markets Inc (NASDAQ:CBOE), American Homes 4 Rent (NYSE:AMH), and Cemex SAB de CV (NYSE:CX). This group of stocks’ market values are similar to STLD’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
FIVE 43 1010018 1
IRM 16 56371 -2
RGEN 38 1039405 1
TREX 23 203682 -7
CBOE 33 767928 -5
AMH 27 677079 0
CX 24 471444 2
Average 29.1 603704 -1.4

View table here if you experience formatting issues.

As you can see these stocks had an average of 29.1 hedge funds with bullish positions and the average amount invested in these stocks was $604 million. That figure was $571 million in STLD’s case. Five Below Inc (NASDAQ:FIVE) is the most popular stock in this table. On the other hand Iron Mountain Incorporated (NYSE:IRM) is the least popular one with only 16 bullish hedge fund positions. Steel Dynamics, Inc. (NASDAQ:STLD) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for STLD is 41.1. 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 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 still beat the market by 6.7 percentage points. A small number of hedge funds were also right about betting on STLD as the stock returned 21.7% since the end of the first quarter (through 7/9) and outperformed the market by an even larger margin.

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