It has been a fantastic year for equity investors as Donald Trump pressured Federal Reserve to reduce interest rates and finalized the first leg of a trade deal with China. If you were a passive index fund investor, you had seen gains of 31% in your equity portfolio in 2019. However, if you were an active investor putting your money into hedge funds’ favorite stocks, you had seen gains of more than 41%. In this article we are going to take a look at how hedge funds feel about a stock like Spirit AeroSystems Holdings, Inc. (NYSE:SPR) and compare its performance against hedge funds’ favorite stocks.
Is Spirit AeroSystems Holdings, Inc. (NYSE:SPR) a healthy stock for your portfolio? Prominent investors are taking a bullish view. The number of bullish hedge fund bets advanced by 5 recently. Our calculations also showed that SPR isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video at the end of this article for Q2 rankings).
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’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 27.8% through November 21, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Jeremy Mindich of Scopia Capital
We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We even check out this option genius’ weekly trade ideas. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager’s investor letter and the stock already gained 20 percent. Now we’re going to take a gander at the key hedge fund action regarding Spirit AeroSystems Holdings, Inc. (NYSE:SPR).
Hedge fund activity in Spirit AeroSystems Holdings, Inc. (NYSE:SPR)
Heading into the fourth quarter of 2019, a total of 36 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 16% from the second quarter of 2019. Below, you can check out the change in hedge fund sentiment towards SPR over the last 17 quarters. With hedge funds’ sentiment swirling, there exists a select group of notable hedge fund managers who were upping their stakes substantially (or already accumulated large positions).
The largest stake in Spirit AeroSystems Holdings, Inc. (NYSE:SPR) was held by Darsana Capital Partners, which reported holding $489.4 million worth of stock at the end of September. It was followed by AQR Capital Management with a $398.1 million position. Other investors bullish on the company included Sculptor Capital, Scopia Capital, and D E Shaw. In terms of the portfolio weights assigned to each position Darsana Capital Partners allocated the biggest weight to Spirit AeroSystems Holdings, Inc. (NYSE:SPR), around 18.14% of its 13F portfolio. Scopia Capital is also relatively very bullish on the stock, setting aside 13.03 percent of its 13F equity portfolio to SPR.
Consequently, some big names were leading the bulls’ herd. Crescent Park Management, managed by Eli Cohen, established the most valuable position in Spirit AeroSystems Holdings, Inc. (NYSE:SPR). Crescent Park Management had $36.1 million invested in the company at the end of the quarter. Ryan Pedlow’s Two Creeks Capital Management also initiated a $26.7 million position during the quarter. The other funds with new positions in the stock are Phill Gross and Robert Atchinson’s Adage Capital Management, Sander Gerber’s Hudson Bay Capital Management, and Alexander Mitchell’s Scopus Asset Management.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Spirit AeroSystems Holdings, Inc. (NYSE:SPR) but similarly valued. We will take a look at F5 Networks, Inc. (NASDAQ:FFIV), The Trade Desk, Inc. (NASDAQ:TTD), Ionis Pharmaceuticals, Inc. (NASDAQ:IONS), and Nordson Corporation (NASDAQ:NDSN). This group of stocks’ market caps are similar to SPR’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| FFIV | 22 | 1179111 | -1 |
| TTD | 25 | 388607 | 1 |
| IONS | 25 | 379230 | 7 |
| NDSN | 15 | 43658 | -2 |
| Average | 21.75 | 497652 | 1.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 21.75 hedge funds with bullish positions and the average amount invested in these stocks was $498 million. That figure was $2062 million in SPR’s case. The Trade Desk, Inc. (NASDAQ:TTD) is the most popular stock in this table. On the other hand Nordson Corporation (NASDAQ:NDSN) is the least popular one with only 15 bullish hedge fund positions. Compared to these stocks Spirit AeroSystems Holdings, Inc. (NYSE:SPR) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.1% in 2019 through December 23rd and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. Unfortunately SPR wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on SPR were disappointed as the stock returned 4.4% so far in 2019 (through 12/23) and trailed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as 65 percent of these stocks already outperformed the market in 2019.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
