Where Do Hedge Funds Stand On Steel Connect, Inc. (STCN)?
Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds' and successful investors' positions as of the end of the third quarter. You can find articles about an individual hedge fund's trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 5 years and analyze what the smart money thinks of Steel Connect, Inc. (NASDAQ:STCN) based on that data.
Hedge fund interest in Steel Connect, Inc. (NASDAQ:STCN) shares was flat at the end of last quarter. This is usually a negative indicator. Our calculations also showed that STCN 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). The level and the change in hedge fund popularity aren't the only variables you need to analyze to decipher hedge funds' perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That's why at the end of this article we will examine companies such as A. H. Belo Corporation (NYSE:AHC), Flanigan's Enterprises, Inc. (NYSE:BDL), and Bellicum Pharmaceuticals Inc (NASDAQ:BLCM) to gather more data points.
Video: Watch our video about the top 5 most popular hedge fund stocks.
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 113% since March 2017 and outperformed the S&P 500 ETFs by more than 66 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Warren Lichtenstein of Steel Partners
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 10 most profitable companies in the world 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. Keeping this in mind let's take a gander at the recent hedge fund action regarding Steel Connect, Inc. (NASDAQ:STCN).
What does smart money think about Steel Connect, Inc. (NASDAQ:STCN)?
At Q3's end, a total of 4 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 STCN over the last 21 quarters. With hedgies' sentiment swirling, there exists an "upper tier" of notable hedge fund managers who were adding to their holdings substantially (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Steel Partners, managed by Warren Lichtenstein, holds the largest position in Steel Connect, Inc. (NASDAQ:STCN). Steel Partners has a $9.9 million position in the stock, comprising 5.1% of its 13F portfolio. On Steel Partners's heels is Renaissance Technologies, which holds a $1.3 million position; less than 0.1%% of its 13F portfolio is allocated to the stock. Other members of the smart money with similar optimism consist of Mario Gabelli's GAMCO Investors, Frederick Tucker Golden's Solas Capital Management and . In terms of the portfolio weights assigned to each position Steel Partners allocated the biggest weight to Steel Connect, Inc. (NASDAQ:STCN), around 5.07% of its 13F portfolio. Solas Capital Management is also relatively very bullish on the stock, dishing out 0.42 percent of its 13F equity portfolio to STCN.
Earlier we told you that the aggregate hedge fund interest in the stock was unchanged and we view this as a negative development. Even though there weren't any hedge funds dumping their holdings during the third quarter, there weren't any hedge funds initiating brand new positions. This indicates that hedge funds, at the very best, perceive this stock as dead money and they haven't identified any viable catalysts that can attract investor attention.
Let's now review hedge fund activity in other stocks - not necessarily in the same industry as Steel Connect, Inc. (NASDAQ:STCN) but similarly valued. We will take a look at A. H. Belo Corporation (NYSE:AHC), Flanigan's Enterprises, Inc. (NYSE:BDL), Bellicum Pharmaceuticals Inc (NASDAQ:BLCM), Taylor Devices, Inc. (NASDAQ:TAYD), U.S. Gold Corp. (NASDAQ:USAU), Kintara Therapeutics, Inc. (NASDAQ:KTRA), and Unique Fabricating Inc (NYSE:UFAB). All of these stocks' market caps resemble STCN's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position AHC,4,2794,-1 BDL,1,1135,0 BLCM,3,3376,-1 TAYD,2,631,0 USAU,1,525,0 KTRA,1,241,-1 UFAB,2,2183,0 Average,2,1555,-0.4 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 2 hedge funds with bullish positions and the average amount invested in these stocks was $2 million. That figure was $12 million in STCN's case. A. H. Belo Corporation (NYSE:AHC) is the most popular stock in this table. On the other hand Flanigan's Enterprises, Inc. (NYSE:BDL) is the least popular one with only 1 bullish hedge fund positions. Steel Connect, Inc. (NASDAQ:STCN) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for STCN is 75. 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 20 most popular stocks among hedge funds 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 November 27th and still beat the market by 16.1 percentage points. Hedge funds were also right about betting on STCN as the stock returned 72.2% since the end of Q3 (through 11/27) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
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Disclosure: None. This article was originally published at Insider Monkey.
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