We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (see why hell is coming).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. Before we spend countless hours researching a company, we like to analyze what insiders, hedge funds and billionaire investors think of the stock first. This is a necessary first step in our investment process because our research has shown that the elite investors’ consensus returns have been exceptional. In the following paragraphs, we find out what the billionaire investors and hedge funds think of Insperity Inc (NYSE:NSP).
Insperity Inc (NYSE:NSP) shareholders have witnessed a decrease in activity from the world’s largest hedge funds in recent months. NSP was in 21 hedge funds’ portfolios at the end of December. There were 28 hedge funds in our database with NSP positions at the end of the previous quarter. Our calculations also showed that NSP isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 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. 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 41 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
Paul Marshall of Marshall Wace
We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind let’s analyze the key hedge fund action regarding Insperity Inc (NYSE:NSP).
How have hedgies been trading Insperity Inc (NYSE:NSP)?
At the end of the fourth quarter, a total of 21 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -25% from the previous quarter. The graph below displays the number of hedge funds with bullish position in NSP over the last 18 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Of the funds tracked by Insider Monkey, Paul Marshall and Ian Wace’s Marshall Wace LLP has the largest position in Insperity Inc (NYSE:NSP), worth close to $61 million, corresponding to 0.4% of its total 13F portfolio. Coming in second is Michael Kahan and Jeremy Kahan of North Peak Capital, with a $49.1 million position; the fund has 13.3% of its 13F portfolio invested in the stock. Some other professional money managers with similar optimism include Parag Vora’s HG Vora Capital Management, Philip Hilal’s Clearfield Capital and Ken Griffin’s Citadel Investment Group. In terms of the portfolio weights assigned to each position Clearfield Capital allocated the biggest weight to Insperity Inc (NYSE:NSP), around 14.01% of its 13F portfolio. North Peak Capital is also relatively very bullish on the stock, dishing out 13.29 percent of its 13F equity portfolio to NSP.
Since Insperity Inc (NYSE:NSP) has experienced falling interest from hedge fund managers, we can see that there was a specific group of fund managers who sold off their full holdings last quarter. Interestingly, Ken Grossman and Glen Schneider’s SG Capital Management dropped the biggest stake of the 750 funds followed by Insider Monkey, valued at close to $15.9 million in stock, and Peter Muller’s PDT Partners was right behind this move, as the fund dumped about $9.1 million worth. These moves are important to note, as total hedge fund interest was cut by 7 funds last quarter.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Insperity Inc (NYSE:NSP) but similarly valued. These stocks are FirstCash, Inc. (NASDAQ:FCFS), Silgan Holdings Inc. (NASDAQ:SLGN), Omnicell, Inc. (NASDAQ:OMCL), and Neogen Corporation (NASDAQ:NEOG). This group of stocks’ market valuations are similar to NSP’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| FCFS | 16 | 172761 | -3 |
| SLGN | 17 | 210117 | -1 |
| OMCL | 13 | 96313 | 2 |
| NEOG | 16 | 17534 | 1 |
| Average | 15.5 | 124181 | -0.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 15.5 hedge funds with bullish positions and the average amount invested in these stocks was $124 million. That figure was $348 million in NSP’s case. Silgan Holdings Inc. (NASDAQ:SLGN) is the most popular stock in this table. On the other hand Omnicell, Inc. (NASDAQ:OMCL) is the least popular one with only 13 bullish hedge fund positions. Compared to these stocks Insperity Inc (NYSE:NSP) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 17.4% in 2020 through March 25th and still beat the market by 5.5 percentage points. Unfortunately NSP wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on NSP were disappointed as the stock returned -59.2% during the first two and a half months of 2020 (through March 25th) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as most of these stocks already outperformed the market in Q1.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
