Hedge Funds Are Piling Into SunPower Corporation (SPWR)

Our extensive research has shown that imitating the smart money can generate significant returns for retail investors, which is why we track nearly 900 active prominent money managers and analyze their quarterly 13F filings. The stocks that are heavily bought by hedge funds historically outperformed the market, though there is no shortage of high profile failures like hedge funds’ 2018 losses in Facebook and Apple. Let’s take a closer look at what the funds we track think about SunPower Corporation (NASDAQ:SPWR) in this article.

Is SunPower Corporation (NASDAQ:SPWR) a sound investment today? Money managers were getting more bullish. The number of bullish hedge fund bets increased by 7 in recent months. SunPower Corporation (NASDAQ:SPWR) was in 25 hedge funds’ portfolios at the end of June. The all time high for this statistic was previously 24. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that SPWR isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).

So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still 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). We have been able to outperform the passive index funds by tracking the moves of corporate insiders and hedge funds, and we believe small investors can benefit a lot from reading hedge fund investor letters and 13F filings.

Scott Bessent of Key Square Capital Management

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. 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. 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. Now we’re going to take a glance at the recent hedge fund action surrounding SunPower Corporation (NASDAQ:SPWR).

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

At the end of the second quarter, a total of 25 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 39% from the previous quarter. On the other hand, there were a total of 16 hedge funds with a bullish position in SPWR a year ago. With the smart money’s sentiment swirling, there exists an “upper tier” of noteworthy hedge fund managers who were increasing their stakes meaningfully (or already accumulated large positions).

More specifically, D E Shaw was the largest shareholder of SunPower Corporation (NASDAQ:SPWR), with a stake worth $93.4 million reported as of the end of June. Trailing D E Shaw was Citadel Investment Group, which amassed a stake valued at $48.6 million. Citadel Investment Group, Millennium Management, and PEAK6 Capital Management 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 Key Square Capital Management allocated the biggest weight to SunPower Corporation (NASDAQ:SPWR), around 3.07% of its 13F portfolio. Autonomy Capital is also relatively very bullish on the stock, setting aside 1.6 percent of its 13F equity portfolio to SPWR.

Now, specific money managers have jumped into SunPower Corporation (NASDAQ:SPWR) headfirst. Key Square Capital Management, managed by Scott Bessent, assembled the most valuable position in SunPower Corporation (NASDAQ:SPWR). Key Square Capital Management had $16.2 million invested in the company at the end of the quarter. Mark Coe’s Intrinsic Edge Capital also made a $14.8 million investment in the stock during the quarter. The other funds with brand new SPWR positions are Todd J. Kantor’s Encompass Capital Advisors, Robert Charles Gibbins’s Autonomy Capital, and Paul Marshall and Ian Wace’s Marshall Wace LLP.

Let’s also examine hedge fund activity in other stocks similar to SunPower Corporation (NASDAQ:SPWR). These stocks are RBC Bearings Incorporated (NASDAQ:ROLL), Ortho Clinical Diagnostics Holdings plc (NASDAQ:OCDX), MSC Industrial Direct Co Inc (NYSE:MSM), Valmont Industries, Inc. (NYSE:VMI), 3D Systems Corporation (NYSE:DDD), Rayonier Inc. (NYSE:RYN), and Nomad Foods Limited (NYSE:NOMD). This group of stocks’ market values are similar to SPWR’s market value.

View table here if you experience formatting issues.

As you can see these stocks had an average of 18.9 hedge funds with bullish positions and the average amount invested in these stocks was $323 million. That figure was $232 million in SPWR’s case. Nomad Foods Limited (NYSE:NOMD) is the most popular stock in this table. On the other hand RBC Bearings Incorporated (NASDAQ:ROLL) is the least popular one with only 9 bullish hedge fund positions. SunPower Corporation (NASDAQ:SPWR) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for SPWR is 87.1. 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 positive signal but 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 beat the market again by 1.6 percentage points. Unfortunately SPWR wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on SPWR were disappointed as the stock returned 0.7% 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 many of these stocks already outperformed the market since 2019.

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