Is The Scotts Miracle-Gro Company (NYSE:SMG) a good place to invest some of your money right now? We can gain invaluable insight to help us answer that question by studying the investment trends of top investors, who employ world-class Ivy League graduates, who are given immense resources and industry contacts to put their financial expertise to work. The top picks of these firms have historically outperformed the market when we account for known risk factors, making them very valuable investment ideas.
The Scotts Miracle-Gro Company (NYSE:SMG) shareholders have witnessed an increase in enthusiasm from smart money lately. The Scotts Miracle-Gro Company (NYSE:SMG) was in 34 hedge funds’ portfolios at the end of March. The all time high for this statistic is 34. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. There were 29 hedge funds in our database with SMG positions at the end of the fourth quarter. Our calculations also showed that SMG isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).
So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 more than 115 percentage points since March 2017 (see the details here). We have been able to outperform the passive index funds by tracking the moves of corporate insiders and hedge funds, and we believe small investors can benefit a lot from reading hedge fund investor letters and 13F filings.
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. 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 analyze the fresh hedge fund action surrounding The Scotts Miracle-Gro Company (NYSE:SMG).
Do Hedge Funds Think SMG Is A Good Stock To Buy Now?
At Q1’s end, a total of 34 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 17% from the fourth quarter of 2020. By comparison, 28 hedge funds held shares or bullish call options in SMG a year ago. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to Insider Monkey’s hedge fund database, Fisher Asset Management, managed by Ken Fisher, holds the most valuable position in The Scotts Miracle-Gro Company (NYSE:SMG). Fisher Asset Management has a $189.3 million position in the stock, comprising 0.1% of its 13F portfolio. Sitting at the No. 2 spot is Alexander Mitchell of Scopus Asset Management, with a $61.2 million position; the fund has 0.8% of its 13F portfolio invested in the stock. Other hedge funds and institutional investors with similar optimism contain Israel Englander’s Millennium Management, Mario Gabelli’s GAMCO Investors and Ken Griffin’s Citadel Investment Group. In terms of the portfolio weights assigned to each position McKinley Capital Management allocated the biggest weight to The Scotts Miracle-Gro Company (NYSE:SMG), around 0.78% of its 13F portfolio. Sandbar Asset Management is also relatively very bullish on the stock, setting aside 0.78 percent of its 13F equity portfolio to SMG.
Now, some big names have jumped into The Scotts Miracle-Gro Company (NYSE:SMG) headfirst. Scopus Asset Management, managed by Alexander Mitchell, established the biggest call position in The Scotts Miracle-Gro Company (NYSE:SMG). Scopus Asset Management had $12.2 million invested in the company at the end of the quarter. McKinley Capital Management also initiated a $10.3 million position during the quarter. The other funds with brand new SMG positions are Israel Englander’s Millennium Management, Jonathan Soros’s JS Capital, and Frank Fu’s CaaS Capital.
Let’s now take a look at hedge fund activity in other stocks similar to The Scotts Miracle-Gro Company (NYSE:SMG). These stocks are Dynatrace, Inc. (NYSE:DT), Leidos Holdings Inc (NYSE:LDOS), James Hardie Industries plc (NYSE:JHX), NovoCure Limited (NASDAQ:NVCR), Alliant Energy Corporation (NYSE:LNT), Evergy, Inc. (NYSE:EVRG), and Mohawk Industries, Inc. (NYSE:MHK). All of these stocks’ market caps match SMG’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| DT | 52 | 1638106 | -1 |
| LDOS | 18 | 93802 | 4 |
| JHX | 4 | 12557 | 0 |
| NVCR | 22 | 292428 | 0 |
| LNT | 13 | 98600 | -16 |
| EVRG | 30 | 1197999 | -3 |
| MHK | 36 | 1297287 | -3 |
| Average | 25 | 661540 | -2.7 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 25 hedge funds with bullish positions and the average amount invested in these stocks was $662 million. That figure was $445 million in SMG’s case. Dynatrace, Inc. (NYSE:DT) is the most popular stock in this table. On the other hand James Hardie Industries plc (NYSE:JHX) is the least popular one with only 4 bullish hedge fund positions. The Scotts Miracle-Gro Company (NYSE:SMG) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for SMG is 71.3. 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 19.3% in 2021 through June 25th and beat the market again by 4.8 percentage points. Unfortunately SMG wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on SMG were disappointed as the stock returned -22.5% since the end of March (through 6/25) 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.
Follow Scotts Miracle-Gro Co (NYSE:SMG)
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Disclosure: None. This article was originally published at Insider Monkey.
