Spire Inc (SR): Are Hedge Funds Right About This Stock?

It seems that the masses and most of the financial media hate hedge funds and what they do, but why is this hatred of hedge funds so prominent? At the end of the day, these asset management firms do not gamble the hard-earned money of the people who are on the edge of poverty. Truth be told, most hedge fund managers and other smaller players within this industry are very smart and skilled investors. Of course, they may also make wrong bets in some instances, but no one knows what the future holds and how market participants will react to the bountiful news that floods in each day. The S&P 500 Index gained 7.6% in the 12 month-period that ended November 21, while less than 49% of its stocks beat the benchmark. In contrast, the 30 most popular mid-cap stocks among the top hedge fund investors tracked by the Insider Monkey team returned 18% over the same period, which provides evidence that these money managers do have great stock picking abilities. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like Spire Inc (NYSE:SR) .

Spire Inc (NYSE:SR) investors should be aware of a decrease in enthusiasm from smart money of late. SR was in 11 hedge funds’ portfolios at the end of the third quarter of 2016. There were 14 hedge funds in our database with SR holdings 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 Belden Inc. (NYSE:BDC), Chemours Co (NYSE:CC), and Radian Group Inc (NYSE:RDN) to gather more data points.

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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Now, let’s take a look at the recent action surrounding Spire Inc(NYSE:SR).

How are hedge funds trading Spire Inc (NYSE:SR)?

At the end of the third quarter, a total of 11 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -21% from one quarter earlier. By comparison, 0 hedge funds held shares or bullish call options in SR heading into this year. With hedge funds’ sentiment swirling, there exists a select group of noteworthy hedge fund managers who were boosting their holdings substantially (or already accumulated large positions).

Of the funds tracked by Insider Monkey, Jonathan Barrett and Paul Segal’s Luminus Management has the largest position in Spire Inc (NYSE:SR), worth close to $37.2 million, amounting to 0.9% of its total 13F portfolio. Coming in second is Zimmer Partners, led by Stuart J. Zimmer, holding a $34.1 million position; the fund has 0.9% of its 13F portfolio invested in the stock. Some other professional money managers that are bullish encompass Renaissance Technologies, one of the largest hedge funds in the world, D E Shaw and Glenn Russell Dubin’s Highbridge Capital Management. We should note that two of these hedge funds (Luminus Management and Zimmer 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.

We already know that not all hedge funds are bullish on the stock and some hedge funds actually got rid of their positions entirely. It’s worth mentioning that Jos Shaver’s Electron Capital Partners got rid of the largest investment of the 700 funds tracked by Insider Monkey, valued at close to $7.1 million in stock, and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital was right behind this move, as the fund said goodbye to about $4.8 million worth of shares.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Spire Inc (NYSE:SR) but similarly valued. We will take a look at Belden Inc. (NYSE:BDC), Chemours Co (NYSE:CC), Radian Group Inc (NYSE:RDN), and Physicians Realty Trust (NYSE:DOC). This group of stocks’ market values match SR’s market value.

As you can see these stocks had an average of 23.25 hedge funds with bullish positions and the average amount invested in these stocks was $320 million. That figure was $118 million in SR’s case. Chemours Co (NYSE:CC) is the most popular stock in this table. On the other hand Belden Inc. (NYSE:BDC) is the least popular one with only 17 bullish hedge fund positions. Compared to these stocks Spire Inc (NYSE:SR) is even less popular than BDC. Considering that hedge funds aren’t fond of this stock in relation to other companies analyzed in this article, it may be a good idea to analyze it in detail and understand why the smart money isn’t behind this stock. This isn’t necessarily bad news. Although it is possible that hedge funds may think the stock is overpriced and view the stock as a short candidate, they may not be very familiar with the bullish thesis. In either case more research is warranted.

Disclosure: None