Is SPB Stock A Buy or Sell?

A whopping number of 13F filings filed with U.S. Securities and Exchange Commission has been processed by Insider Monkey so that individual investors can look at the overall hedge fund sentiment towards the stocks included in their watchlists. These freshly-submitted public filings disclose money managers’ equity positions as of the end of the three-month period that ended December 31st, so let’s proceed with the discussion of the hedge fund sentiment on Spectrum Brands Holdings, Inc. (NYSE:SPB).

Is SPB stock a buy? The smart money was cutting their exposure. The number of long hedge fund bets went down by 3 in recent months. Spectrum Brands Holdings, Inc. (NYSE:SPB) was in 35 hedge funds’ portfolios at the end of December. The all time high for this statistic is 45. Our calculations also showed that SPB isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings). There were 38 hedge funds in our database with SPB holdings at the end of September.

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 S&P 500 ETFs by more than 124 percentage points since March 2017 (see the details here).

David Siegel of Two Sigma Advisors

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, the House passed a landmark bill decriminalizing marijuana. So, we are checking out this under the radar cannabis stock right now. We go through lists like the 10 best battery stocks to buy to identify the next stock with 10x upside potential. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. With all of this in mind we’re going to review the fresh hedge fund action encompassing Spectrum Brands Holdings, Inc. (NYSE:SPB).

Do Hedge Funds Think SPB Is A Good Stock To Buy Now?

At fourth quarter’s end, a total of 35 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -8% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards SPB over the last 22 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, Scopus Asset Management was the largest shareholder of Spectrum Brands Holdings, Inc. (NYSE:SPB), with a stake worth $106.6 million reported as of the end of December. Trailing Scopus Asset Management was Pzena Investment Management, which amassed a stake valued at $69.2 million. Millennium Management, Moerus Capital Management, and AREX Capital Management 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 AREX Capital Management allocated the biggest weight to Spectrum Brands Holdings, Inc. (NYSE:SPB), around 23.86% of its 13F portfolio. Moerus Capital Management is also relatively very bullish on the stock, designating 18.15 percent of its 13F equity portfolio to SPB.

Because Spectrum Brands Holdings, Inc. (NYSE:SPB) has witnessed declining sentiment from the entirety of the hedge funds we track, it’s safe to say that there is a sect of hedgies that elected to cut their positions entirely heading into Q1. Interestingly, Peter Muller’s PDT Partners dropped the biggest position of all the hedgies watched by Insider Monkey, comprising an estimated $2.4 million in stock, and Lee Ainslie’s Maverick Capital was right behind this move, as the fund dumped about $1.3 million worth. These transactions are important to note, as aggregate hedge fund interest was cut by 3 funds heading into Q1.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Spectrum Brands Holdings, Inc. (NYSE:SPB) but similarly valued. These stocks are UFP Industries, Inc. (NASDAQ:UFPI), BRF SA (NYSE:BRFS), Insmed Incorporated (NASDAQ:INSM), GW Pharmaceuticals plc (NASDAQ:GWPH), Glaukos Corporation (NYSE:GKOS), FibroGen Inc (NASDAQ:FGEN), and SelectQuote, Inc. (NYSE:SLQT). This group of stocks’ market caps resemble SPB’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 18.3 hedge funds with bullish positions and the average amount invested in these stocks was $216 million. That figure was $599 million in SPB’s case. Insmed Incorporated (NASDAQ:INSM) is the most popular stock in this table. On the other hand BRF SA (NYSE:BRFS) is the least popular one with only 11 bullish hedge fund positions. Compared to these stocks Spectrum Brands Holdings, Inc. (NYSE:SPB) is more popular among hedge funds. Our overall hedge fund sentiment score for SPB is 75.3. 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. Our calculations showed that top 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks returned 7.9% in 2021 through April 1st but still managed to beat the market by 0.4 percentage points. Hedge funds were also right about betting on SPB as the stock returned 10.1% since the end of December (through 4/1) 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.