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: Standard Motor Products, Inc. (NYSE:SMP).
Standard Motor Products, Inc. (NYSE:SMP) has experienced a decrease in support from the world’s most successful money managers recently. SMP was in 10 hedge funds’ portfolios at the end of September. There were 11 hedge funds in our database with SMP positions at the end of the previous quarter. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Transportadora de Gas del Sur SA (ADR) (NYSE:TGS), Milacron Holdings Corp (NYSE:MCRN), and Kraton Performance Polymers Inc (NYSE:KRA) to gather more data points.
At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.
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Now, let’s take a look at the fresh action surrounding Standard Motor Products, Inc. (NYSE:SMP).
How are hedge funds trading Standard Motor Products, Inc. (NYSE:SMP)?
At Q3’s end, a total of 10 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -9% from the second quarter of 2016. On the other hand, there were a total of 19 hedge funds with a bullish position in SMP at the beginning of this year. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Of the funds tracked by Insider Monkey, Chuck Royce of Royce & Associates holds the most valuable position in Standard Motor Products, Inc. (NYSE:SMP). Royce & Associates has a $120.2 million position in the stock. Coming in second is Mario Gabelli of GAMCO Investors, with a $7.6 million position. Other peers that are bullish comprise Martin Whitman’s Third Avenue Management, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital and Cliff Asness’ AQR Capital Management. We should note that none of these elite funds are among our list of the 100 best performing elite funds which is based on the performance of their 13F long positions in non-microcap stocks.
Due to the fact that Standard Motor Products, Inc. (NYSE:SMP) has weathered a decline in interest from the smart money, it’s safe to say that there were a few fund managers that decided to sell off their full holdings heading into Q4. At the top of the heap, John Overdeck and David Siegel’s Two Sigma Advisors sold off the biggest position of all the investors watched by Insider Monkey, worth close to $0.8 million in stock, and Clinton Group was right behind this move, as the fund cut about $0.3 million worth of shares.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Standard Motor Products, Inc. (NYSE:SMP) but similarly valued. These stocks are Transportadora de Gas del Sur SA (ADR) (NYSE:TGS), Milacron Holdings Corp (NYSE:MCRN), Kraton Performance Polymers Inc (NYSE:KRA), and Interface, Inc. (NASDAQ:TILE). All of these stocks’ market caps resemble SMP’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| TGS | 6 | 20610 | -1 |
| MCRN | 6 | 74600 | -2 |
| KRA | 25 | 227559 | 1 |
| TILE | 21 | 114656 | 3 |
As you can see these stocks had an average of 14 hedge funds with bullish positions and the average amount invested in these stocks was $109 million. That figure was $145 million in SMP’s case. Kraton Performance Polymers Inc (NYSE:KRA) is the most popular stock in this table. On the other hand Transportadora de Gas del Sur SA (ADR) (NYSE:TGS) is the least popular one with only 6 bullish hedge fund positions. Standard Motor Products, Inc. (NYSE:SMP) 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 KRA might be a better candidate to consider taking a long position in.
Disclosure: None
