Reputable billionaire investors such as Nelson Peltz and David Tepper generate exorbitant profits for their wealthy accredited investors (a minimum of $1 million in investable assets would be required to invest in a hedge fund and most successful hedge funds won’t accept your savings unless you commit at least $5 million) by pinpointing winning small-cap stocks. There is little or no publicly-available information at all on some of these small companies, which makes it hard for an individual investor to pin down a winner within the small-cap space. However, hedge funds and other big asset managers can do the due diligence and analysis for you instead, thanks to their highly-skilled research teams and vast resources to conduct an appropriate evaluation process. Looking for potential winners within the small-cap galaxy of stocks? We believe following the smart money is a good starting point.
SP Plus Corp (NASDAQ:SP) shareholders have witnessed an increase in support from the world’s most elite money managers in recent months. SP was in 12 hedge funds’ portfolios at the end of September. There were 11 hedge funds in our database with SP holdings at the end of the previous quarter. Our calculations also showed that sp isn’t among the 30 most popular stocks among hedge funds.
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 market by 18 percentage points since May 2014 through December 3, 2018 (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. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in our short portfolio.
Cliff Asness of AQR Capital Management
Let’s analyze the latest hedge fund action encompassing SP Plus Corp (NASDAQ:SP).
How are hedge funds trading SP Plus Corp (NASDAQ:SP)?
At Q3’s end, a total of 12 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 9% from the second quarter of 2018. Below, you can check out the change in hedge fund sentiment towards SP over the last 13 quarters. 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 SP Plus Corp (NASDAQ:SP) was held by P2 Capital Partners, which reported holding $41.3 million worth of stock at the end of September. It was followed by Renaissance Technologies with a $21.4 million position. Other investors bullish on the company included AQR Capital Management, Lionstone Capital Management, and Third Avenue Management.
As aggregate interest increased, specific money managers were breaking ground themselves. Marshall Wace LLP, managed by Paul Marshall and Ian Wace, established the most valuable position in SP Plus Corp (NASDAQ:SP). Marshall Wace LLP had $0.8 million invested in the company at the end of the quarter.
Let’s now take a look at hedge fund activity in other stocks similar to SP Plus Corp (NASDAQ:SP). We will take a look at Banco Latinoamericano de Comercio Exterior, S.A. (NYSE:BLX), Delek Logistics Partners LP (NYSE:DKL), Sonic Automotive Inc (NYSE:SAH), and Stock Yards Bancorp, Inc. (NASDAQ:SYBT). All of these stocks’ market caps match SP’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| BLX | 1 | 5036 | 0 |
| DKL | 1 | 571 | 0 |
| SAH | 9 | 8321 | 3 |
| SYBT | 9 | 19462 | 0 |
| Average | 5 | 8348 | 0.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 5 hedge funds with bullish positions and the average amount invested in these stocks was $8 million. That figure was $113 million in SP’s case. Sonic Automotive Inc (NYSE:SAH) is the most popular stock in this table. On the other hand Banco Latinoamericano de Comercio Exterior, S.A. (NYSE:BLX) is the least popular one with only 1 bullish hedge fund positions. Compared to these stocks SP Plus Corp (NASDAQ:SP) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.
Disclosure: None. This article was originally published at Insider Monkey.
