Do Hedge Funds Love Spirit AeroSystems Holdings, Inc. (SPR)?

Before we spend days researching a stock idea we’d like to take a look at how hedge funds and billionaire investors recently traded that stock. S&P 500 Index returned about 7.6% during the last 12 months ending November 21, 2016. Most investors don’t notice that less than 49% of the stocks in the index outperformed the index. This means you (or a monkey throwing a dart) have less than an even chance of beating the market by randomly picking a stock. On the other hand, the top 30 mid-cap stocks among the best performing hedge funds had an average return of 18% during the same period. Hedge funds had bad stock picks like everyone else. We are sure you have read about their worst picks, like Valeant, in the media over the past year. So, taking cues from hedge funds isn’t a foolproof strategy, but it seems to work on average. In this article, we will take a look at what hedge funds think about Spirit AeroSystems Holdings, Inc. (NYSE:SPR).

Is Spirit AeroSystems Holdings, Inc. (NYSE:SPR) a bargain? Prominent investors are reducing their bets on the stock. The number of bullish hedge fund positions were trimmed by 4 in recent months. SPR was in 30 hedge funds’ portfolios at the end of September. There were 34 hedge funds in our database with SPR positions at the end of the previous quarter. At the end of this article we will also compare SPR to other stocks including Arrow Electronics, Inc. (NYSE:ARW), Seattle Genetics, Inc. (NASDAQ:SGEN), and Genpact Limited (NYSE:G) to get a better sense of its popularity.

At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.

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Keeping this in mind, we’re going to view the key action regarding Spirit AeroSystems Holdings, Inc. (NYSE:SPR).

What have hedge funds been doing with Spirit AeroSystems Holdings, Inc. (NYSE:SPR)?

Heading into the fourth quarter of 2016, a total of 30 of the hedge funds tracked by Insider Monkey were long this stock, a drop of 12% from the second quarter of 2016. With hedge funds’ positions undergoing their usual ebb and flow, there exists a few notable hedge fund managers who were boosting their stakes meaningfully (or already accumulated large positions).

Of the funds tracked by Insider Monkey, Scopia Capital, managed by Matt Sirovich and Jeremy Mindich, holds the biggest position in Spirit AeroSystems Holdings, Inc. (NYSE:SPR). According to regulatory filings, the fund has a $564.6 million position in the stock, comprising 10% of its 13F portfolio. Sitting at the No. 2 spot is Hound Partners, led by Jonathan Auerbach, holding a $476.5 million position; the fund has 12.8% of its 13F portfolio invested in the stock. Other members of the smart money with similar optimism contain Anand Desai’s Darsana Capital Partners, D. E. Shaw’s D E Shaw and Cliff Asness’s AQR Capital Management.

Due to the fact that Spirit AeroSystems Holdings, Inc. (NYSE:SPR) has experienced a decline in interest from the smart money, logic holds that there was a specific group of money managers who sold off their entire stakes by the end of the third quarter. At the top of the heap, Yen Liow’s Aravt Global cut the largest stake of the “upper crust” of funds tracked by Insider Monkey, totaling about $73.1 million in stock, and Alex Duran and Scott Hendrickson’s Permian Investment Partners was right behind this move, as the fund dumped about $31.6 million worth of SPR shares. These moves are interesting, as total hedge fund interest fell by 4 funds by the end of the third quarter.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Spirit AeroSystems Holdings, Inc. (NYSE:SPR) but similarly valued. We will take a look at Arrow Electronics, Inc. (NYSE:ARW), Seattle Genetics, Inc. (NASDAQ:SGEN), Genpact Limited (NYSE:G), and CF Industries Holdings, Inc. (NYSE:CF). This group of stocks’ market values are similar to SPR’s market value.

As you can see these stocks had an average of 25 hedge funds with bullish positions and the average amount invested in these stocks was $1.11 billion. That figure was $2.03 billion in SPR’s case. CF Industries Holdings, Inc. (NYSE:CF) is the most popular stock in this table. On the other hand Arrow Electronics, Inc. (NYSE:ARW) is the least popular one with only 18 bullish hedge fund positions. Spirit AeroSystems Holdings, Inc. (NYSE:SPR) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. In this regard CF might be a better candidate to consider a long position.

Disclosure: none.