Hedge Funds Are Nibbling On Spirit Realty Capital Inc (SRC)

With the second-quarter round of 13F filings behind us it is time to take a look at the stocks in which some of the best money managers in the world preferred to invest or sell heading into the third quarter of 2021. One of these stocks was Spirit Realty Capital Inc (NYSE:SRC).

Is Spirit Realty Capital Inc (NYSE:SRC) an attractive stock to buy now? Prominent investors were buying. The number of bullish hedge fund positions inched up by 1 recently. Spirit Realty Capital Inc (NYSE:SRC) was in 19 hedge funds’ portfolios at the end of June. The all time high for this statistic is 37. Our calculations also showed that SRC isn’t among the 30 most popular stocks among hedge funds (click for Q2 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 79 percentage points since March 2017 (see the details here). So you can still find a lot of gems by following hedge funds’ moves today.

Dmitry Balyasny of Balyasny Asset Management

Now let’s take a look at the latest hedge fund action regarding Spirit Realty Capital Inc (NYSE:SRC).

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

Heading into the third quarter of 2021, a total of 19 of the hedge funds tracked by Insider Monkey were long this stock, a change of 6% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards SRC over the last 24 quarters. With hedgies’ sentiment swirling, there exists a few noteworthy hedge fund managers who were increasing their holdings considerably (or already accumulated large positions).

More specifically, Long Pond Capital was the largest shareholder of Spirit Realty Capital Inc (NYSE:SRC), with a stake worth $124 million reported as of the end of June. Trailing Long Pond Capital was Waterfront Capital Partners, which amassed a stake valued at $32.9 million. Balyasny Asset Management, Segantii Capital, and Two Sigma Advisors 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 Long Pond Capital allocated the biggest weight to Spirit Realty Capital Inc (NYSE:SRC), around 4.31% of its 13F portfolio. Waterfront Capital Partners is also relatively very bullish on the stock, setting aside 2.47 percent of its 13F equity portfolio to SRC.

Consequently, key hedge funds have been driving this bullishness. Waterfront Capital Partners, managed by Eduardo Abush, assembled the most valuable position in Spirit Realty Capital Inc (NYSE:SRC). Waterfront Capital Partners had $32.9 million invested in the company at the end of the quarter. Simon Sadler’s Segantii Capital also initiated a $14.3 million position during the quarter. The other funds with new positions in the stock are Paul Tudor Jones’s Tudor Investment Corp, Clint Carlson’s Carlson Capital, and Donald Sussman’s Paloma Partners.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Spirit Realty Capital Inc (NYSE:SRC) but similarly valued. These stocks are Vontier Corporation (NYSE:VNT), Helen of Troy Limited (NASDAQ:HELE), Surgery Partners, Inc. (NASDAQ:SGRY), Ollie’s Bargain Outlet Holdings Inc (NASDAQ:OLLI), TG Therapeutics Inc (NASDAQ:TGTX), ImmunityBio, Inc. (NASDAQ:IBRX), and Synaptics Incorporated (NASDAQ:SYNA). This group of stocks’ market caps are similar to SRC’s market cap.

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As you can see these stocks had an average of 20.7 hedge funds with bullish positions and the average amount invested in these stocks was $346 million. That figure was $259 million in SRC’s case. Vontier Corporation (NYSE:VNT) is the most popular stock in this table. On the other hand ImmunityBio, Inc. (NASDAQ:IBRX) is the least popular one with only 7 bullish hedge fund positions. Spirit Realty Capital Inc (NYSE:SRC) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for SRC is 43.6. 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 24% in 2021 through October 22nd and surpassed the market again by 1.6 percentage points. Unfortunately SRC wasn’t nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); SRC investors were disappointed as the stock returned 3.2% since the end of June (through 10/22) 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.