Is Sinopec Shanghai Petrochemical Company Limited (SHI) Going to Burn These Hedge Funds?

Many prominent investors, including Warren Buffett, David Tepper and Stan Druckenmiller, have been cautious regarding the current bull market and missed out as the stock market reached another high in recent weeks. On the other hand, technology hedge funds weren’t timid and registered double digit market beating gains. Financials, energy and industrial stocks initially suffered the most but many of these stocks delivered strong returns since November and hedge funds actually increased their positions in these stocks. In this article we will find out how hedge fund sentiment towards Sinopec Shanghai Petrochemical Company Limited (NYSE:SHI) changed recently.

Sinopec Shanghai Petrochemical Company Limited (NYSE:SHI) has seen a decrease in hedge fund interest of late. Sinopec Shanghai Petrochemical Company Limited (NYSE:SHI) was in 4 hedge funds’ portfolios at the end of March. The all time high for this statistic is 6. Our calculations also showed that SHI isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).

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. Hedge funds have more than $3.5 trillion in assets under management, so you can’t expect their entire portfolios to beat the market by large margins. Our research was 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). So you can still find a lot of gems by following hedge funds’ moves today.

Ryan Tolkin, CIO of Schonfeld Strategic Advisors

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, an activist hedge fund wants to buy this $28 biotech stock for $50. So, we recommended a long position to our monthly premium newsletter subscribers. 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. Keeping this in mind we’re going to take a look at the key hedge fund action surrounding Sinopec Shanghai Petrochemical Company Limited (NYSE:SHI).

Do Hedge Funds Think SHI Is A Good Stock To Buy Now?

At the end of March, a total of 4 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -20% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards SHI over the last 23 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Of the funds tracked by Insider Monkey, Renaissance Technologies has the biggest position in Sinopec Shanghai Petrochemical Company Limited (NYSE:SHI), worth close to $11.2 million, comprising less than 0.1%% of its total 13F portfolio. Sitting at the No. 2 spot is Arrowstreet Capital, led by Peter Rathjens, Bruce Clarke and John Campbell, holding a $3.1 million position; less than 0.1%% of its 13F portfolio is allocated to the company. Other hedge funds and institutional investors that hold long positions contain Ryan Tolkin (CIO)’s Schonfeld Strategic Advisors, Ken Griffin’s Citadel Investment Group and . In terms of the portfolio weights assigned to each position Renaissance Technologies allocated the biggest weight to Sinopec Shanghai Petrochemical Company Limited (NYSE:SHI), around 0.01% of its 13F portfolio. Arrowstreet Capital is also relatively very bullish on the stock, earmarking 0.0042 percent of its 13F equity portfolio to SHI.

We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Marshall Wace LLP. One hedge fund selling its entire position doesn’t always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don’t think this is the case in this case because none of the 750+ hedge funds tracked by Insider Monkey identified SHI as a viable investment and initiated a position in the stock.

Let’s now take a look at hedge fund activity in other stocks similar to Sinopec Shanghai Petrochemical Company Limited (NYSE:SHI). We will take a look at Marathon Digital Holdings, Inc. (NASDAQ:MARA), BlackBerry Limited (NYSE:BB), Synaptics Incorporated (NASDAQ:SYNA), Shake Shack Inc (NYSE:SHAK), Neogen Corporation (NASDAQ:NEOG), Valvoline Inc. (NYSE:VVV), and The Hanover Insurance Group, Inc. (NYSE:THG). This group of stocks’ market valuations are closest to SHI’s market valuation.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position MARA,10,197814,2 BB,24,499771,-7 SYNA,25,533817,-3 SHAK,23,560136,-2 NEOG,10,29017,-6 VVV,23,677540,-4 THG,18,95544,-2 Average,19,370520,-3.1 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 19 hedge funds with bullish positions and the average amount invested in these stocks was $371 million. That figure was $15 million in SHI’s case. Synaptics Incorporated (NASDAQ:SYNA) is the most popular stock in this table. On the other hand Marathon Digital Holdings, Inc. (NASDAQ:MARA) is the least popular one with only 10 bullish hedge fund positions. Compared to these stocks Sinopec Shanghai Petrochemical Company Limited (NYSE:SHI) is even less popular than MARA. Our overall hedge fund sentiment score for SHI is 24. 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 clearly dropped the ball on SHI as the stock delivered strong returns, though hedge funds’ consensus picks still generated respectable returns. 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 17.2% in 2021 through June 11th and still beat the market by 3.3 percentage points. A small number of hedge funds were also right about betting on SHI as the stock returned 11.9% since Q1 (through June 11th) and outperformed the market by an even larger margin.

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Disclosure: None. This article was originally published at Insider Monkey.

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