Hedge funds and other investment firms run by legendary investors like Israel Englander, Jeffrey Talpins and Ray Dalio are entrusted to manage billions of dollars of accredited investors’ money because they are without peer in the resources they use to identify the best investments for their chosen investment horizon. Moreover, they are more willing to invest a greater amount of their resources in small-cap stocks than big brokerage houses, and this is often where they generate their outperformance, which is why we pay particular attention to their best ideas in this space.
Is SP Plus Corp (NASDAQ:SP) a buy here? Prominent investors are in a pessimistic mood. The number of bullish hedge fund positions dropped by 1 recently. Our calculations also showed that SP isn’t among the 30 most popular stocks among hedge funds (see the video below). SP was in 13 hedge funds’ portfolios at the end of June. There were 14 hedge funds in our database with SP holdings at the end of the previous quarter.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
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. Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 25.7% through September 30, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. We’re going to take a look at the new hedge fund action regarding SP Plus Corp (NASDAQ:SP).
What have hedge funds been doing with SP Plus Corp (NASDAQ:SP)?
At Q2’s end, a total of 13 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -7% from the first quarter of 2019. By comparison, 11 hedge funds held shares or bullish call options in SP a year ago. With the smart money’s sentiment swirling, there exists a select group of noteworthy hedge fund managers who were increasing their holdings meaningfully (or already accumulated large positions).
The largest stake in SP Plus Corp (NASDAQ:SP) was held by P2 Capital Partners, which reported holding $36.2 million worth of stock at the end of March. It was followed by Renaissance Technologies with a $18.6 million position. Other investors bullish on the company included AQR Capital Management, Millennium Management, and Marshall Wace LLP.
Seeing as SP Plus Corp (NASDAQ:SP) has faced falling interest from the aggregate hedge fund industry, it’s safe to say that there exists a select few hedge funds who were dropping their entire stakes heading into Q3. Interestingly, David Harding’s Winton Capital Management said goodbye to the largest investment of the “upper crust” of funds tracked by Insider Monkey, worth about $0.4 million in stock, and Roger Ibbotson’s Zebra Capital Management was right behind this move, as the fund said goodbye to about $0.2 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest dropped by 1 funds heading into Q3.
Let’s now review hedge fund activity in other stocks similar to SP Plus Corp (NASDAQ:SP). We will take a look at Community Healthcare Trust Inc (NYSE:CHCT), Kiniksa Pharmaceuticals, Ltd. (NASDAQ:KNSA), INTL Fcstone Inc (NASDAQ:INTL), and Bryn Mawr Bank Corp. (NASDAQ:BMTC). This group of stocks’ market values are closest to SP’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CHCT | 8 | 81504 | -1 |
| KNSA | 9 | 77379 | -1 |
| INTL | 11 | 84299 | -4 |
| BMTC | 9 | 35889 | -1 |
| Average | 9.25 | 69768 | -1.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 9.25 hedge funds with bullish positions and the average amount invested in these stocks was $70 million. That figure was $96 million in SP’s case. INTL Fcstone Inc (NASDAQ:INTL) is the most popular stock in this table. On the other hand Community Healthcare Trust Inc (NYSE:CHCT) is the least popular one with only 8 bullish hedge fund positions. Compared to these stocks SP Plus Corp (NASDAQ:SP) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Hedge funds were also right about betting on SP as the stock returned 15.9% during Q3 and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.
Disclosure: None. This article was originally published at Insider Monkey.
