We are still in an overall bull market and many stocks that smart money investors were piling into surged in 2019. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 57% each. Hedge funds’ top 3 stock picks returned 44.6% this year and beat the S&P 500 ETFs by nearly 14 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like Spectrum Brands Holdings, Inc. (NYSE:SPB).
Is Spectrum Brands Holdings, Inc. (NYSE:SPB) a bargain? Investors who are in the know are in a bullish mood. The number of bullish hedge fund bets rose by 10 recently. Our calculations also showed that SPB isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video at the end of this article for Q2 rankings). SPB was in 34 hedge funds’ portfolios at the end of September. There were 24 hedge funds in our database with SPB holdings at the end of the previous quarter.
In the 21st century investor’s toolkit there are a large number of tools shareholders use to evaluate stocks. Some of the most useful tools are hedge fund and insider trading sentiment. Our researchers have shown that, historically, those who follow the top picks of the best fund managers can outpace their index-focused peers by a superb amount (see the details here).
Richard S. Pzena of Pzena Investment Management
We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We even check out this option genius’ weekly trade ideas. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager’s investor letter and the stock already gained 20 percent. Keeping this in mind we’re going to check out the fresh hedge fund action regarding Spectrum Brands Holdings, Inc. (NYSE:SPB).
What have hedge funds been doing with Spectrum Brands Holdings, Inc. (NYSE:SPB)?
Heading into the fourth quarter of 2019, a total of 34 of the hedge funds tracked by Insider Monkey were long this stock, a change of 42% from the previous quarter. On the other hand, there were a total of 26 hedge funds with a bullish position in SPB a year ago. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Spectrum Brands Holdings, Inc. (NYSE:SPB) was held by Leucadia National, which reported holding $396.2 million worth of stock at the end of September. It was followed by Arlington Value Capital with a $164.4 million position. Other investors bullish on the company included Pzena Investment Management, Moerus Capital Management, and Cardinal Capital. In terms of the portfolio weights assigned to each position Leucadia National allocated the biggest weight to Spectrum Brands Holdings, Inc. (NYSE:SPB), around 71.25% of its 13F portfolio. Moerus Capital Management is also relatively very bullish on the stock, designating 12.33 percent of its 13F equity portfolio to SPB.
Consequently, specific money managers have been driving this bullishness. Renaissance Technologies, assembled the biggest position in Spectrum Brands Holdings, Inc. (NYSE:SPB). Renaissance Technologies had $3.8 million invested in the company at the end of the quarter. Peter Muller’s PDT Partners also made a $3.1 million investment in the stock during the quarter. The other funds with brand new SPB positions are Brad Dunkley and Blair Levinsky’s Waratah Capital Advisors, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, and Michael Price’s MFP Investors.
Let’s now take a look at hedge fund activity in other stocks similar to Spectrum Brands Holdings, Inc. (NYSE:SPB). We will take a look at California Water Service Group (NYSE:CWT), Allegheny Technologies Incorporated (NYSE:ATI), Immunomedics, Inc. (NASDAQ:IMMU), and Weight Watchers International, Inc. (NASDAQ:WW). This group of stocks’ market valuations are similar to SPB’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CWT | 15 | 52003 | 3 |
| ATI | 20 | 155971 | -1 |
| IMMU | 20 | 537294 | -1 |
| WW | 28 | 537184 | 7 |
| Average | 20.75 | 320613 | 2 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 20.75 hedge funds with bullish positions and the average amount invested in these stocks was $321 million. That figure was $785 million in SPB’s case. Weight Watchers International, Inc. (NASDAQ:WW) is the most popular stock in this table. On the other hand California Water Service Group (NYSE:CWT) is the least popular one with only 15 bullish hedge fund positions. Compared to these stocks Spectrum Brands Holdings, Inc. (NYSE:SPB) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.1% in 2019 through December 23rd and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. Hedge funds were also right about betting on SPB as the stock returned 55.4% so far in 2019 (through 12/23) 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.
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.
