Our extensive research has shown that imitating the smart money can generate significant returns for retail investors,what is the average cost of varilux lenses which is why we track nearly 817 active prominent money managers and analyze their quarterly 13F filings. The stocks that are heavily bought by hedge funds historically outperformed the market, though there is no shortage of high profile failures like hedge funds' 2018 losses in Facebook and Apple. Let’s take a closer look at what the funds we track think about Sirius International Insurance Group, Ltd. (NASDAQ:
SG
) in this article.
Is
Sirius International Insurance (
SG
) a good stock to buy now?
The best stock pickers were becoming more confident. The number of long hedge fund positions advanced by 4 lately. Sirius International Insurance Group, Ltd. (NASDAQ:
SG
) was in 6 hedge funds' portfolios at the end of September. The all time high for this statistics is 16. Our calculations also showed that SG 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). There were 2 hedge funds in our database with SG holdings at the end of June.
Video: Watch our video about the top 5 most popular hedge fund stocks.
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. 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 66 percentage points since March 2017 (
see the details here
). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
Michael Price MFP Investors
Michael Price of MFP Investors
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
. With all of this in mind let's take a glance at the fresh hedge fund action encompassing Sirius International Insurance Group, Ltd. (NASDAQ:
SG
).
Story continues
Hedge fund activity in Sirius International Insurance Group, Ltd. (NASDAQ:SG)
At the end of the third quarter, a total of 6 of the hedge funds tracked by Insider Monkey were long this stock, a change of 200% from the previous quarter. On the other hand, there were a total of 3 hedge funds with a bullish position in SG a year ago. With hedgies' capital changing hands, there exists an "upper tier" of key hedge fund managers who were increasing their stakes significantly (or already accumulated large positions).
More specifically, Ursa Fund Management was the largest shareholder of Sirius International Insurance Group, Ltd. (NASDAQ:SG), with a stake worth $3.5 million reported as of the end of September. Trailing Ursa Fund Management was MFP Investors, which amassed a stake valued at $2.1 million. Havens Advisors, Odey Asset Management Group, and Levin Easterly Partners were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position
Havens Advisors
allocated the biggest weight to Sirius International Insurance Group, Ltd. (NASDAQ:SG), around 1.84% of its 13F portfolio.
Ursa Fund Management
is also relatively very bullish on the stock, designating 1.8 percent of its 13F equity portfolio to SG.
Now, key hedge funds have jumped into Sirius International Insurance Group, Ltd. (NASDAQ:SG) headfirst. Ursa Fund Management, managed by Andrew Hahn, initiated the largest position in Sirius International Insurance Group, Ltd. (NASDAQ:SG). Ursa Fund Management had $3.5 million invested in the company at the end of the quarter. Nancy Havens-Hasty's Havens Advisors also made a $2 million investment in the stock during the quarter. The following funds were also among the new SG investors: Crispin Odey's
Odey Asset Management Group
and Mark Kleiman's
Factorial Partners
.
Let's now review hedge fund activity in other stocks - not necessarily in the same industry as Sirius International Insurance Group, Ltd. (NASDAQ:SG) but similarly valued. These stocks are Gray Television, Inc. (NYSE:
GTN
), Sangamo Therapeutics, Inc. (NASDAQ:
SGMO
), So-Young International Inc. (NASDAQ:
SY
), Apollo Commercial Real Est. Finance Inc (NYSE:
ARI
), Allscripts Healthcare Solutions Inc (NASDAQ:
MDRX
), Silicon Motion Technology Corp. (NASDAQ:
SIMO
), and Hercules Capital Inc (NYSE:
HTGC
). All of these stocks' market caps are similar to SG's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position GTN,25,114310,-1 SGMO,28,122664,6 SY,7,15987,0 ARI,14,32597,4 MDRX,22,129055,6 SIMO,15,216253,-2 HTGC,13,42715,-2 Average,17.7,96226,1.6 [/table]
View table here
if you experience formatting issues.
As you can see these stocks had an average of 17.7 hedge funds with bullish positions and the average amount invested in these stocks was $96 million. That figure was $9 million in SG's case. Sangamo Therapeutics, Inc. (NASDAQ:
SGMO
) is the most popular stock in this table. On the other hand So-Young International Inc. (NASDAQ:
SY
) is the least popular one with only 7 bullish hedge fund positions. Compared to these stocks Sirius International Insurance Group, Ltd. (NASDAQ:SG) is even less popular than SY. Our overall hedge fund sentiment score for SG is 20.3. 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. Hedge funds dodged a bullet by taking a bearish stance towards SG. 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 November 27th but managed to beat the market again by 16.1 percentage points. Unfortunately SG wasn't nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); SG investors were disappointed as the stock returned 1.6% since the end of the third quarter (through 11/27) 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.
Get real-time email alerts: Follow Sirius International Insurance Group Ltd. (NASDAQ:SG)
Disclosure: None. This article was originally published at
Insider Monkey
.
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As shown below, the results in the quarter materially changed the trend in two-year stacked comps for each of the banners, along with a significant acceleration for consolidated comps.
The increase in consolidated comps was the primary driver of an 8% increase in revenues to $6.3 billion. The company ended the quarter with 15,370 locations, up less than 1% year-over-year. This reflects a 7% increase in Dollar Tree units, offset by a 4% decline in Family Dollar units.
The top-line results at each banner flowed through to their respective income statements, with Dollar Tree gross margins and operating margins declining year-over-year while Family Dollar gross margins and operating margins expanded year-over-year. On a consolidated basis, gross margins contracted by 120 basis points in the quarter to 28.5%, reflective of a shift to lower-margin consumables, tariff costs and the impact of markdowns from the Easter headwinds at the Dollar Tree banner. The company saw slight operating leverage on SG&A from higher comps, with the net result being an 80 basis point contraction in operating margins to 5.8%, with operating income declining 5% to $366 million. This is not adjusted for $73 million of pandemic-related costs, such as PPE supplies.
In the first quarter, the company opened 85 stores (net of closures) and completed 220 Family Dollar renovations to the H2 format. Importantly, comps at renovated Family Dollar stores continue to outpace the chain average by more than 10%. On the call, management indicated that they plan on reducing both the number of new store openings (from 550 to 500) and the number of H2 renovations (from 1,250 to 750) in 2020.
Personally, given the fact that Family Dollar is seeing material benefits to its business from the pandemic with new or lapsed customers coming into its stores, I think the company should try to get more aggressive with its renovation plans, not less. On the other hand, you could argue that renovations cause short-term disruptions and limit their ability to fully capitalize on the business momentum they are currently experiencing.
As a result of fewer new stores and remodels, management now expects 2020 capital expenditures to total $1.0 billion compared to previous guidance of $1.2 billion. In addition, the company has temporarily suspended share repurchases. At quarter's end, the company had $1.8 billion in cash on its balance sheet compared to $4.3 billion in total debt.
Conclusion
In recent years, Dollar Tree has been a tale of two cities. While its namesake banner has generally delivered impressive financial results, Family Dollar has been a persistent underperformer. This quarter, those results flipped, and given what we've seen in the weeks since quarter's end, there's a decent possibility that we will see something similar in the coming months. As the CEO noted, the second quarter is off to a very good start at Family Dollar.
Here's the important question: how useful is that information is in terms of making future predictions about the business? Will recent success at Family Dollar translate into long-term success for the banner? The optimistic take is that new or lapsed customers, especially those visiting the renovated stores, could become recurring business for the banner. The pessimistic take is that they have experienced short-term success out of necessity as people went to any store that was open to try and find essentials like toilet paper and hand sanitizer that were largely out of stock throughout the retail landscape. From that view, many of these customers could abandon the retailer when life returns to normal. As Philbin noted on the conference call, early on [during the pandemic], folks needed us. Will people still shop as much at Family Dollar when it's no longer a necessity?
Personally, I do not place too much weight on the recent results. I will need to see incremental data points that indicate that Family Dollar has truly won sustained business from these new customers. While I still believe that the Dollar Tree banner is a well-positioned retailer with attractive unit returns, I'm not yet willing to say the same thing for Family Dollar. For that reason, along with the recent run-up in the stock price, I plan on staying on the sidelines for now.
Disclosure: None
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