As we already know from media reports and hedge fund investor letters, hedge funds delivered their best returns in a decade. Most investors who decided to stick with hedge funds after a rough 2018 recouped their losses by the end of the fourth quarter of 2019. A significant number of hedge funds continued their strong performance in 2020 and 2021 as well. We get to see hedge funds’ thoughts towards the market and individual stocks by aggregating their quarterly portfolio movements and reading their investor letters. In this article, we will particularly take a look at what hedge funds think about Spirit Realty Capital Inc (NYSE:SRC).
Spirit Realty Capital Inc (NYSE:SRC) investors should pay attention to an increase in hedge fund sentiment in recent months. Spirit Realty Capital Inc (NYSE:SRC) was in 23 hedge funds’ portfolios at the end of September. The all time high for this statistic is 37. There were 19 hedge funds in our database with SRC holdings at the end of June. Our calculations also showed that SRC isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings).
Paul Marshall of Marshall Wace
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so 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. Keeping this in mind let’s check out the new hedge fund action regarding Spirit Realty Capital Inc (NYSE:SRC).
Do Hedge Funds Think SRC Is A Good Stock To Buy Now?
At the end of September, a total of 23 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 21% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards SRC over the last 25 quarters. With the smart money’s capital changing hands, there exists a select group of key hedge fund managers who were increasing their holdings significantly (or already accumulated large positions).
Among these funds, Long Pond Capital held the most valuable stake in Spirit Realty Capital Inc (NYSE:SRC), which was worth $175.8 million at the end of the third quarter. On the second spot was Waterfront Capital Partners which amassed $60.3 million worth of shares. Balyasny Asset Management, Millennium Management, 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 6.44% of its 13F portfolio. Waterfront Capital Partners is also relatively very bullish on the stock, designating 4.25 percent of its 13F equity portfolio to SRC.
As one would reasonably expect, specific money managers were breaking ground themselves. Marshall Wace LLP, managed by Paul Marshall and Ian Wace, assembled the most outsized position in Spirit Realty Capital Inc (NYSE:SRC). Marshall Wace LLP had $14.1 million invested in the company at the end of the quarter. Michael Gelband’s ExodusPoint Capital also initiated a $4.5 million position during the quarter. The other funds with brand new SRC positions are Renaissance Technologies, Mika Toikka’s AlphaCrest Capital Management, and David Harding’s Winton Capital Management.
Let’s check out hedge fund activity in other stocks similar to Spirit Realty Capital Inc (NYSE:SRC). These stocks are Novanta Inc. (NASDAQ:NOVT), EngageSmart, LLC (NYSE:ESMT), I-Mab (NASDAQ:IMAB), Medallia, Inc. (NYSE:MDLA), Canopy Growth Corporation (NYSE:CGC), nVent Electric plc (NYSE:NVT), and LifeStance Health Group Inc. (NASDAQ:LFST). All of these stocks’ market caps match SRC’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| NOVT | 15 | 98422 | -1 |
| ESMT | 28 | 241632 | 28 |
| IMAB | 18 | 837725 | 0 |
| MDLA | 29 | 889127 | 6 |
| CGC | 17 | 90312 | 1 |
| NVT | 34 | 552905 | 4 |
| LFST | 9 | 60535 | -13 |
| Average | 21.4 | 395808 | 3.6 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 21.4 hedge funds with bullish positions and the average amount invested in these stocks was $396 million. That figure was $384 million in SRC’s case. nVent Electric plc (NYSE:NVT) is the most popular stock in this table. On the other hand LifeStance Health Group Inc. (NASDAQ:LFST) is the least popular one with only 9 bullish hedge fund positions. Spirit Realty Capital Inc (NYSE:SRC) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for SRC is 55.6. 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 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 31.1% in 2021 through December 9th and beat the market again by 5.1 percentage points. Unfortunately SRC wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on SRC were disappointed as the stock returned 1.6% since the end of September (through 12/9) 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.
