Hedge funds and large money managers usually invest with a focus on the long-term horizon and, therefore, short-lived dips or bumps on the charts usually don't make them change their opinion towards a company. This time it may be different. The coronavirus pandemic destroyed the high correlations among major industries and asset classes. We are now in a stock pickers market where fundamentals of a stock have more effect on the price than the overall direction of the market. As a result we observe sudden and large changes in hedge fund positions depending on the news flow. Let’s take a look at the hedge fund sentiment towards Star Bulk Carriers Corp. (NASDAQ:SBLK) to find out whether there were any major changes in hedge funds' views.
Star Bulk Carriers Corp. (NASDAQ:SBLK) has experienced an increase in hedge fund sentiment recently. Star Bulk Carriers Corp. (NASDAQ:SBLK) was in 24 hedge funds' portfolios at the end of the second quarter of 2021. The all time high for this statistic was previously 19. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. There were 13 hedge funds in our database with SBLK positions at the end of the first quarter. Our calculations also showed that SBLK isn't among the 30 most popular stocks among hedge funds (click for Q2 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 185.4% since March 2017 and outperformed the S&P 500 ETFs by more than 79 percentage points (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Howard Marks of Oaktree Capital Management
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 EV 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 key hedge fund action encompassing Star Bulk Carriers Corp. (NASDAQ:SBLK).
Do Hedge Funds Think SBLK Is A Good Stock To Buy Now?
At Q2's end, a total of 24 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 85% from one quarter earlier. On the other hand, there were a total of 7 hedge funds with a bullish position in SBLK a year ago. With the smart money's capital changing hands, there exists a few key hedge fund managers who were increasing their stakes considerably (or already accumulated large positions).
The largest stake in Star Bulk Carriers Corp. (NASDAQ:SBLK) was held by Oaktree Capital Management, which reported holding $596.5 million worth of stock at the end of June. It was followed by Driehaus Capital with a $38.6 million position. Other investors bullish on the company included Marshall Wace LLP, Impala Asset Management, and CaaS Capital. In terms of the portfolio weights assigned to each position Oaktree Capital Management allocated the biggest weight to Star Bulk Carriers Corp. (NASDAQ:SBLK), around 8.07% of its 13F portfolio. Valueworks LLC is also relatively very bullish on the stock, dishing out 3.58 percent of its 13F equity portfolio to SBLK.
As industrywide interest jumped, key hedge funds were leading the bulls' herd. CaaS Capital, managed by Frank Fu, established the most valuable position in Star Bulk Carriers Corp. (NASDAQ:SBLK). CaaS Capital had $28.4 million invested in the company at the end of the quarter. Michael Gelband's ExodusPoint Capital also initiated a $10.6 million position during the quarter. The other funds with brand new SBLK positions are Charles Lemonides's Valueworks LLC, Charles Davidson and Joseph Jacobs's Wexford Capital, and Matthew Hulsizer's PEAK6 Capital Management.
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Star Bulk Carriers Corp. (NASDAQ:SBLK) but similarly valued. These stocks are Brandywine Realty Trust (NYSE:BDN), Covanta Holding Corporation (NYSE:CVA), Xperi Holding Corporation (NASDAQ:XPER), Revolution Medicines, Inc. (NASDAQ:RVMD), Trinseo PLC (NYSE:TSE), Plains GP Holdings LP (NASDAQ:PAGP), and Industrias Bachoco, S.A.B. de C.V. (NYSE:IBA). This group of stocks' market valuations are closest to SBLK's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position BDN,7,32122,-5 CVA,26,249237,5 XPER,20,150161,-1 RVMD,29,485088,3 TSE,17,41352,0 PAGP,15,77499,0 IBA,2,34534,0 Average,16.6,152856,0.3 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 16.6 hedge funds with bullish positions and the average amount invested in these stocks was $153 million. That figure was $863 million in SBLK's case. Revolution Medicines, Inc. (NASDAQ:RVMD) is the most popular stock in this table. On the other hand Industrias Bachoco, S.A.B. de C.V. (NYSE:IBA) is the least popular one with only 2 bullish hedge fund positions. Star Bulk Carriers Corp. (NASDAQ:SBLK) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for SBLK is 80.7. 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 October 22nd and beat the market again by 1.6 percentage points. Unfortunately SBLK wasn't nearly as popular as these 5 stocks and hedge funds that were betting on SBLK were disappointed as the stock returned -2.6% since the end of June (through 10/22) 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.