Do Hedge Funds Love Spectrum Brands Holdings, Inc. (SPB)?

Most investors tend to think that hedge funds and other asset managers are worthless, as they cannot beat even simple index fund portfolios. In fact, most people expect hedge funds to compete with and outperform the bull market that we have witnessed in recent years. However, hedge funds are generally partially hedged and aim at delivering attractive risk-adjusted returns rather than following the ups and downs of equity markets hoping that they will outperform the broader market. Our research shows that certain hedge funds do have great stock picking skills (and we can identify these hedge funds in advance pretty accurately), so let’s take a glance at the smart money sentiment towards Spectrum Brands Holdings, Inc. (NYSE:SPB).

Spectrum Brands Holdings, Inc. (NYSE:SPB) has seen a decrease in hedge fund sentiment lately. Spectrum Brands Holdings, Inc. (NYSE:SPB) was in 30 hedge funds’ portfolios at the end of the third quarter of 2021. The all time high for this statistic is 45. Our calculations also showed that SPB isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings).

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so 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. With all of this in mind let’s take a peek at the key hedge fund action regarding Spectrum Brands Holdings, Inc. (NYSE:SPB).

Chuck Royce of Royce & Associates

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

At the end of September, a total of 30 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -14% from the second quarter of 2021. The graph below displays the number of hedge funds with bullish position in SPB over the last 25 quarters. With hedge funds’ capital changing hands, there exists an “upper tier” of key hedge fund managers who were boosting their stakes meaningfully (or already accumulated large positions).

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Scopus Asset Management, managed by Alexander Mitchell, holds the most valuable position in Spectrum Brands Holdings, Inc. (NYSE:SPB). Scopus Asset Management has a $143.5 million position in the stock, comprising 2.4% of its 13F portfolio. On Scopus Asset Management’s heels is Cardinal Capital, led by Amy Minella, holding a $106.6 million position; the fund has 2.6% of its 13F portfolio invested in the stock. Remaining members of the smart money with similar optimism encompass Richard S. Pzena’s Pzena Investment Management, Chuck Royce’s Royce & Associates and Israel Englander’s Millennium Management. In terms of the portfolio weights assigned to each position Moerus Capital Management allocated the biggest weight to Spectrum Brands Holdings, Inc. (NYSE:SPB), around 16.39% of its 13F portfolio. Blue Grotto Capital is also relatively very bullish on the stock, earmarking 9.72 percent of its 13F equity portfolio to SPB.

Because Spectrum Brands Holdings, Inc. (NYSE:SPB) has faced bearish sentiment from hedge fund managers, it’s easy to see that there lies a certain “tier” of hedgies that slashed their positions entirely in the third quarter. At the top of the heap, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital dropped the largest stake of the “upper crust” of funds followed by Insider Monkey, totaling an estimated $41.7 million in stock, and Ira Unschuld’s Brant Point Investment Management was right behind this move, as the fund sold off about $5 million worth. These moves are interesting, as aggregate hedge fund interest was cut by 5 funds in the third quarter.

Let’s now review hedge fund activity in other stocks similar to Spectrum Brands Holdings, Inc. (NYSE:SPB). These stocks are Safehold Inc. (NYSE:SAFE), Vonage Holdings Corp. (NASDAQ:VG), BRF SA (NYSE:BRFS), Nevro Corp (NYSE:NVRO), Inari Medical, Inc. (NASDAQ:NARI), Apollo Medical Holdings, Inc. (NASDAQ:AMEH), and Cohen & Steers, Inc. (NYSE:CNS). This group of stocks’ market values match SPB’s market value.

View table here if you experience formatting issues.

As you can see these stocks had an average of 18.4 hedge funds with bullish positions and the average amount invested in these stocks was $263 million. That figure was $642 million in SPB’s case. Vonage Holdings Corp. (NASDAQ:VG) is the most popular stock in this table. On the other hand BRF SA (NYSE:BRFS) is the least popular one with only 6 bullish hedge fund positions. Compared to these stocks Spectrum Brands Holdings, Inc. (NYSE:SPB) is more popular among hedge funds. Our overall hedge fund sentiment score for SPB is 70. 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 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 28.6% in 2021 through November 30th and still beat the market by 5.6 percentage points. Unfortunately SPB wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on SPB were disappointed as the stock returned 5% since the end of the third quarter (through 11/30) 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 since 2019.

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