The worries about the election and the ongoing uncertainty about the path of interest-rate increases have been keeping investors on the sidelines. Of course, most hedge funds and other asset managers have been underperforming main stock market indices since the middle of 2015. Interestingly though, smaller-cap stocks registered their best performance relative to the large-capitalization stocks since the end of the June quarter, suggesting that this may be the best time to take a cue from their stock picks. In fact, the Russell 2000 Index gained more than 15% since the beginning of the third quarter, while the Standard and Poor’s 500 benchmark returned less than 6%. This article will lay out and discuss the hedge fund and institutional investor sentiment towards Smith & Wesson Holding Corp (NASDAQ:SWHC).
Smith & Wesson Holding Corp (NASDAQ:SWHC) has experienced an increase in activity from the world’s largest hedge funds recently. At the end of this article we will also compare SWHC to other stocks including Halyard Health Inc (NYSE:HYH), HubSpot Inc (NYSE:HUBS), and Proto Labs Inc (NYSE:PRLB) to get a better sense of its popularity.
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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.
With all of this in mind, we’re going to review the latest action surrounding Smith & Wesson Holding Corp (NASDAQ:SWHC).
How are hedge funds trading Smith & Wesson Holding Corp (NASDAQ:SWHC)?
At the end of the third quarter, a total of 22 of the hedge funds tracked by Insider Monkey were long this stock,up 10% from the previous quarter. With hedge funds’ capital changing hands, there exists a few noteworthy hedge fund managers who were upping their holdings significantly (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital has the most valuable position in Smith & Wesson Holding Corp (NASDAQ:SWHC), worth close to $50.1 million and comprising 0.2% of its total 13F portfolio. The second most bullish fund manager is Gotham Asset Management, led by Joel Greenblatt, holding a $21.4 million position; the fund has 0.3% of its 13F portfolio invested in the stock. Some other members of the smart money with similar optimism encompass Israel Englander’s Millennium Management, Cliff Asness’s AQR Capital Management and John Overdeck and David Siegel’s Two Sigma Advisors.
As aggregate interest increased, some big names were breaking ground themselves. Citadel Investment Group, managed by Ken Griffin, established the biggest call position in Smith & Wesson Holding Corp (NASDAQ:SWHC) worth approximately $3.6 million at the end of the quarter. Andrew Feldstein and Stephen Siderow’s Blue Mountain Capital also initiated a $2.2 million position during the quarter. The following funds were also among the new SWHC investors: D. E. Shaw’s D E Shaw, George Hall’s Clinton Group, and Matthew Tewksbury’s Stevens Capital Management.
Let’s also examine hedge fund activity in other stocks similar to Smith & Wesson Holding Corp (NASDAQ:SWHC). We will take a look at Halyard Health Inc (NYSE:HYH), HubSpot Inc (NYSE:HUBS), Proto Labs Inc (NYSE:PRLB), and Exponent, Inc. (NASDAQ:EXPO). This group of stocks’ market caps are closest to SWHC’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| HYH | 20 | 89019 | 6 |
| HUBS | 24 | 135436 | 5 |
| PRLB | 9 | 96825 | -2 |
| EXPO | 8 | 60977 | -1 |
As you can see these stocks had an average of 15 hedge funds with bullish positions and the average amount invested in these stocks was $96 million. That figure was $161 million in SWHC’s case. HubSpot Inc (NYSE:HUBS) is the most popular stock in this table. On the other hand Exponent, Inc. (NASDAQ:EXPO) is the least popular one with only 8 bullish hedge fund positions. Smith & Wesson Holding Corp (NASDAQ:SWHC) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. In this regard HUBS might be a better candidate to consider a long position.
Disclosure: none.
