Is Sensient Technologies Corporation (SXT) A Good Stock To Buy?
In this article we will take a look at whether hedge funds think Sensient Technologies Corporation (NYSE:SXT) is a good investment right now. We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, unconventional data sources, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.
Is SXT a good stock to buy? The best stock pickers were becoming less hopeful. The number of bullish hedge fund bets fell by 1 in recent months. Sensient Technologies Corporation (NYSE:SXT) was in 16 hedge funds' portfolios at the end of March. The all time high for this statistic is 23. Our calculations also showed that SXT isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings). There were 17 hedge funds in our database with SXT holdings at the end of December.
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 206.8% since March 2017 and outperformed the S&P 500 ETFs by more than 115 percentage points (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Richard Gerson of Falcon Edge Capital
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, pet market is growing at a 7% annual rate and is expected to reach $110 billion in 2021. So, we are checking out the 5 best stocks for animal lovers. We go through lists like the 15 best Jim Cramer stocks to identify the next Tesla that will deliver outsized returns. 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 review the latest hedge fund action surrounding Sensient Technologies Corporation (NYSE:SXT).
Do Hedge Funds Think SXT Is A Good Stock To Buy Now?
At the end of March, a total of 16 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -6% from the fourth quarter of 2020. By comparison, 23 hedge funds held shares or bullish call options in SXT a year ago. With hedge funds' capital changing hands, there exists a select group of noteworthy hedge fund managers who were upping their holdings meaningfully (or already accumulated large positions).
The largest stake in Sensient Technologies Corporation (NYSE:SXT) was held by Falcon Edge Capital, which reported holding $57.2 million worth of stock at the end of December. It was followed by GAMCO Investors with a $38.3 million position. Other investors bullish on the company included Schonfeld Strategic Advisors, Arrowstreet Capital, and Sandbar Asset Management. In terms of the portfolio weights assigned to each position Falcon Edge Capital allocated the biggest weight to Sensient Technologies Corporation (NYSE:SXT), around 3.56% of its 13F portfolio. Sandbar Asset Management is also relatively very bullish on the stock, setting aside 2.19 percent of its 13F equity portfolio to SXT.
Due to the fact that Sensient Technologies Corporation (NYSE:SXT) has witnessed falling interest from the smart money, it's safe to say that there exists a select few money managers who were dropping their full holdings heading into Q2. Interestingly, Vikram Kumar's Kuvari Partners said goodbye to the biggest investment of the 750 funds followed by Insider Monkey, worth an estimated $21.2 million in stock. Paul Marshall and Ian Wace's fund, Marshall Wace LLP, also dumped its stock, about $2 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest dropped by 1 funds heading into Q2.
Let's now review hedge fund activity in other stocks similar to Sensient Technologies Corporation (NYSE:SXT). We will take a look at NorthWestern Corporation (NASDAQ:NWE), ViaSat, Inc. (NASDAQ:VSAT), International Game Technology PLC (NYSE:IGT), HB Fuller Co (NYSE:FUL), National Health Investors Inc (NYSE:NHI), Installed Building Products Inc (NYSE:IBP), and GATX Corporation (NYSE:GATX). This group of stocks' market caps resemble SXT's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position NWE,11,62833,-4 VSAT,26,1183153,-1 IGT,37,236926,12 FUL,16,177537,-2 NHI,11,30136,-2 IBP,21,95091,0 GATX,16,203739,4 Average,19.7,284202,1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 19.7 hedge funds with bullish positions and the average amount invested in these stocks was $284 million. That figure was $204 million in SXT's case. International Game Technology PLC (NYSE:IGT) is the most popular stock in this table. On the other hand NorthWestern Corporation (NASDAQ:NWE) is the least popular one with only 11 bullish hedge fund positions. Sensient Technologies Corporation (NYSE:SXT) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for SXT is 34.5. 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 negative signal and 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 28.5% in 2021 through July 23rd and surpassed the market again by 10.1 percentage points. Unfortunately SXT wasn't nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); SXT investors were disappointed as the stock returned 10.2% since the end of March (through 7/23) 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 most of these stocks already outperformed the market in 2021.
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Disclosure: None. This article was originally published at Insider Monkey.
