Hedge fund managers like David Einhorn, Dan Loeb, or Carl Icahn became billionaires through reaping large profits for their investors, which is why piggybacking their stock picks may provide us with significant returns as well. Many hedge funds, like Paul Singer’s Elliott Management, are pretty secretive, but we can still get some insights by analyzing their quarterly 13F filings. One of the most fertile grounds for large abnormal returns is hedge funds’ most popular small-cap picks, which are not so widely followed and often trade at a discount to their intrinsic value. In this article we will check out hedge fund activity in another small-cap stock: Steel Partners Holdings LP (NYSE:SPLP).
Steel Partners Holdings LP (NYSE:SPLP) shares didn’t see a lot of action during the third quarter. Overall, hedge fund sentiment was unchanged. The stock was in 7 hedge funds’ portfolios at the end of the third quarter of 2016. At the end of this article we will also compare SPLP to other stocks including Spectrum Pharmaceuticals, Inc. (NASDAQ:SPPI), Heska Corp (NASDAQ:HSKA), and Peapack-Gladstone Financial Corp (NASDAQ:PGC) to get a better sense of its popularity.
Follow Steel Partners Holdings L.p. (NYSE:SPLP)
Follow Steel Partners Holdings L.p. (NYSE:SPLP)
We follow over 700 hedge funds and other institutional investors and by analyzing their quarterly 13F filings, we identify stocks that they are collectively bullish on and develop investment strategies based on this data. One strategy that outperformed the market over the last year involves selecting the 100 best-performing funds and identifying the 30 mid-cap stocks that they are collectively most bullish on. Over the past year, this strategy generated returns of 18%, topping the 8% gain registered by S&P 500 ETFs. We launched this strategy 2.5 years ago and it returned more than 39% since then, vs. 22% gain registered by the S&P 500 ETFs.
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With all of this in mind, let’s take a look at the key action encompassing Steel Partners Holdings LP (NYSE:SPLP).
Hedge fund activity in Steel Partners Holdings LP (NYSE:SPLP)
At the end of the third quarter, a total of 7 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the second quarter of 2016. Below, you can check out the change in hedge fund sentiment towards SPLP over the last 5 quarters. With hedge funds’ sentiment swirling, there exists a few noteworthy hedge fund managers who were boosting their stakes significantly (or already accumulated large positions).
According to Insider Monkey’s hedge fund database, Steel Partners, led by Warren Lichtenstein, holds the most valuable position in Steel Partners Holdings LP (NYSE:SPLP). Steel Partners has a $13.4 million position in the stock, comprising 4.1% of its 13F portfolio. On Steel Partners’s heels is Raging Capital Management, led by William C. Martin, which holds a $12.3 million position; the fund has 1.7% of its 13F portfolio invested in the stock. Remaining peers with similar optimism encompass Nathaniel August’s Mangrove Partners, J. Carlo Cannell’s Cannell Capital and Mario Gabelli’s GAMCO Investors. We should note that two of these hedge funds (Raging Capital Management and Mangrove Partners) are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.
Earlier we told you that the aggregate hedge fund interest in the stock was unchanged and we view this as a negative development. Even though there weren’t any hedge funds dumping their holdings during the third quarter, there weren’t any hedge funds initiating brand new positions. This indicates that hedge funds, at the very best, perceive this stock as dead money and they haven’t identified any viable catalysts that can attract investor attention.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Steel Partners Holdings LP (NYSE:SPLP) but similarly valued. These stocks are Spectrum Pharmaceuticals, Inc. (NASDAQ:SPPI), Heska Corp (NASDAQ:HSKA), Peapack-Gladstone Financial Corp (NASDAQ:PGC), and China Cord Blood Corp (NYSE:CO). This group of stocks’ market values are similar to SPLP’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| SPPI | 11 | 40022 | -3 |
| HSKA | 11 | 32670 | -1 |
| PGC | 10 | 77552 | -2 |
| CO | 5 | 15329 | 0 |
As you can see these stocks had an average of 9.25 hedge funds with bullish positions and the average amount invested in these stocks was $41 million. That figure was $33 million in SPLP’s case. Spectrum Pharmaceuticals, Inc. (NASDAQ:SPPI) is the most popular stock in this table. On the other hand China Cord Blood Corp (NYSE:CO) is the least popular one with only 5 bullish hedge fund positions. Steel Partners Holdings LP (NYSE:SPLP) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard SPPI might be a better candidate to consider taking a long position in.
