Should You Avoid Spirit AeroSystems Holdings, Inc. (SPR)?

Is Spirit AeroSystems Holdings, Inc. (NYSE:SPR) a buy?

If you were to ask many of your fellow readers, hedge funds are viewed as useless, old investment tools of a period lost to current times. Although there are In excess of 8,000 hedge funds in operation today, Insider Monkey looks at the masters of this group, about 525 funds. Analysts calculate that this group oversees the lion’s share of all hedge funds’ total capital, and by tracking their highest quality equity investments, we’ve figured out a few investment strategies that have historically outpaced the S&P 500. Our small-cap hedge fund strategy outpaced the S&P 500 index by 18 percentage points per annum for a decade in our back tests, and since we’ve started sharing our picks with our subscribers at the end of August 2012, we have trumped the S&P 500 index by 33 percentage points in 11 months (find the details here).

Just as useful, positive insider trading sentiment is a second way to analyze the financial markets. Obviously, there are lots of incentives for an insider to drop shares of his or her company, but only one, very simple reason why they would initiate a purchase. Plenty of academic studies have demonstrated the useful potential of this tactic if you know where to look (learn more here).

Thus, it’s important to analyze the newest info for Spirit AeroSystems Holdings, Inc. (NYSE:SPR).

How are hedge funds trading Spirit AeroSystems Holdings, Inc. (NYSE:SPR)?

At the end of the second quarter, a total of 29 of the hedge funds we track were long in this stock, a change of -9% from one quarter earlier. With hedgies’ sentiment swirling, there exists a few notable hedge fund managers who were increasing their stakes substantially.

According to our 13F database, Matt Sirovich and Jeremy Mindich’s Scopia Capital had the most valuable position in Spirit AeroSystems Holdings, Inc. (NYSE:SPR), worth close to $395.4 million, comprising 11% of its total 13F portfolio. On Scopia Capital’s heels is Owl Creek Asset Management, managed by Jeffrey Altman, which held a $123.9 million position; the fund has 6.5% of its 13F portfolio invested in the stock. Some other hedge funds that are bullish include William B. Gray’s Orbis Investment Management, Anthony Bozza’s Lakewood Capital Management and Eric Mindich’s Eton Park Capital.

Because Spirit AeroSystems Holdings, Inc. (NYSE:SPR) has experienced declining interest from the top-tier hedge fund industry, it’s safe to say that there exists a select few hedgies who were dropping their positions entirely heading into Q2. It’s worth mentioning that Youlia Miteva’s Proxima Capital Management cut the largest position of all the hedgies we track, valued at about $13.1 million in stock. Neil Chriss’s fund, Hutchin Hill Capital, also sold off its stock, about $3.8 million worth. These moves are intriguing to say the least, as total hedge fund interest was cut by 3 funds heading into Q2.

What do corporate executives and insiders think about Spirit AeroSystems Holdings, Inc. (NYSE:SPR)?

Legal insider trading, particularly when it’s bullish, is particularly usable when the company we’re looking at has experienced transactions within the past 180 days. Over the last 180-day time frame, Spirit AeroSystems Holdings, Inc. (NYSE:SPR) has seen zero unique insiders purchasing, and zero insider sales (see the details of insider trades here).

We’ll also take a look at the relationship between both of these indicators in other stocks similar to Spirit AeroSystems Holdings, Inc. (NYSE:SPR). These stocks are Alliant Techsystems Inc. (NYSE:ATK), CAE, Inc. (USA) (NYSE:CAE), Teledyne Technologies Incorporated (NYSE:TDY), Hexcel Corporation (NYSE:HXL), and Huntington Ingalls Industries Inc (NYSE:HII). All of these stocks are in the aerospace/defense products & services industry and their market caps match SPR’s market cap.

Using the returns shown by the previously mentioned studies, average investors should always pay attention to hedge fund and insider trading sentiment, and Spirit AeroSystems Holdings, Inc. (NYSE:SPR) applies perfectly to this mantra.

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