Is SPX Corporation (SPXC) Going to Burn These Hedge Funds?

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. Insider Monkey finished processing 821 13F filings submitted by hedge funds and prominent investors. These filings show these funds’ portfolio positions as of March 31st, 2020. In this article we are going to take a look at smart money sentiment towards SPX Corporation (NYSE:SPXC).

SPX Corporation (NYSE:SPXC) was in 14 hedge funds’ portfolios at the end of the first quarter of 2020. SPXC has seen a decrease in activity from the world’s largest hedge funds recently. There were 19 hedge funds in our database with SPXC holdings at the end of the previous quarter. Our calculations also showed that SPXC isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).

Video: Watch our video about the top 5 most popular hedge fund stocks.

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 58 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.

Peter Rathjens of Arrowstreet Capital

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, we believe electric vehicles and energy storage are set to become giant markets, and we want to take advantage of the declining lithium prices amid the COVID-19 pandemic. So we are checking out investment opportunities like this one. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. For example we are checking out stocks recommended/scorned by legendary Bill Miller. 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 take a glance at the fresh hedge fund action surrounding SPX Corporation (NYSE:SPXC).

How are hedge funds trading SPX Corporation (NYSE:SPXC)?

At the end of the first quarter, a total of 14 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -26% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards SPXC over the last 18 quarters. With hedge funds’ sentiment swirling, there exists an “upper tier” of notable hedge fund managers who were boosting their holdings substantially (or already accumulated large positions).

Among these funds, Corsair Capital Management held the most valuable stake in SPX Corporation (NYSE:SPXC), which was worth $12.6 million at the end of the third quarter. On the second spot was Millennium Management which amassed $6.1 million worth of shares. Ancora Advisors, Renaissance Technologies, and Arrowstreet Capital 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 Corsair Capital Management allocated the biggest weight to SPX Corporation (NYSE:SPXC), around 6.02% of its 13F portfolio. Ancora Advisors is also relatively very bullish on the stock, dishing out 0.26 percent of its 13F equity portfolio to SPXC.

Due to the fact that SPX Corporation (NYSE:SPXC) has witnessed a decline in interest from the entirety of the hedge funds we track, it’s easy to see that there is a sect of hedge funds that decided to sell off their entire stakes by the end of the first quarter. Intriguingly, Bernard Selz’s Selz Capital dropped the largest stake of all the hedgies watched by Insider Monkey, totaling about $36.5 million in stock, and Ira Unschuld’s Brant Point Investment Management was right behind this move, as the fund sold off about $2.4 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest fell by 5 funds by the end of the first quarter.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as SPX Corporation (NYSE:SPXC) but similarly valued. These stocks are Redfin Corporation (NASDAQ:RDFN), Progress Software Corporation (NASDAQ:PRGS), STAAR Surgical Company (NASDAQ:STAA), and Primo Water Corporation (NYSE:PRMW). This group of stocks’ market caps match SPXC’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 24.75 hedge funds with bullish positions and the average amount invested in these stocks was $322 million. That figure was $48 million in SPXC’s case. Primo Water Corporation (NYSE:PRMW) is the most popular stock in this table. On the other hand Redfin Corporation (NASDAQ:RDFN) is the least popular one with only 20 bullish hedge fund positions. Compared to these stocks SPX Corporation (NYSE:SPXC) is even less popular than RDFN. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 13.3% in 2020 through June 25th but managed to beat the market by 16.8 percentage points. A small number of hedge funds were also right about betting on SPXC, though not to the same extent, as the stock returned 21.5% during the second quarter (through June 25th) and outperformed the market as well.

Disclosure: None. This article was originally published at Insider Monkey.