Did Hedge Funds Make The Right Call On Insperity Inc (NSP) ?

The latest 13F reporting period has come and gone, and Insider Monkey have plowed through 821 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of March 31st, a week after the market trough. Now, we are almost done with the second quarter. Investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned almost 20% this quarter. In this article you are going to find out whether hedge funds thoughtInsperity Inc (NYSE:NSP) was a good investment heading into the second quarter and how the stock traded in comparison to the top hedge fund picks.

Insperity Inc (NYSE:NSP) has experienced an increase in support from the world’s most elite money managers in recent months. NSP was in 29 hedge funds’ portfolios at the end of March. There were 21 hedge funds in our database with NSP positions at the end of the previous quarter. Our calculations also showed that NSP isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).

Video: Watch our video about the top 5 most popular hedge fund stocks.

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’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 58 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.


Larry Robbins of Glenview Capital

At Insider Monkey we scour multiple sources to uncover the next great investment idea. There is a lot of volatility in the markets and this presents amazing investment opportunities from time to time. For example, this trader claims to deliver juiced up returns with one trade a week, so we are checking out his highest conviction idea. A second trader claims to score lucrative profits by utilizing a “weekend trading strategy”, so we look into his strategy’s picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We recently recommended several stocks partly inspired by legendary Bill Miller’s investor letter. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind let’s take a look at the key hedge fund action surrounding Insperity Inc (NYSE:NSP).

Hedge fund activity in Insperity Inc (NYSE:NSP)

At Q1’s end, a total of 29 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 38% from the fourth quarter of 2019. The graph below displays the number of hedge funds with bullish position in NSP over the last 18 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in Insperity Inc (NYSE:NSP) was held by Lakewood Capital Management, which reported holding $46 million worth of stock at the end of September. It was followed by Glenview Capital with a $16.4 million position. Other investors bullish on the company included Millennium Management, Marshall Wace LLP, and Citadel Investment Group. In terms of the portfolio weights assigned to each position Soapstone Capital allocated the biggest weight to Insperity Inc (NYSE:NSP), around 4.82% of its 13F portfolio. Value Holdings LP is also relatively very bullish on the stock, setting aside 3.98 percent of its 13F equity portfolio to NSP.

As aggregate interest increased, specific money managers were breaking ground themselves. Lakewood Capital Management, managed by Anthony Bozza, assembled the most valuable position in Insperity Inc (NYSE:NSP). Lakewood Capital Management had $46 million invested in the company at the end of the quarter. Tim Curro’s Value Holdings LP also initiated a $8.4 million position during the quarter. The other funds with new positions in the stock are Jeff Osher’s No Street Capital, Greg Eisner’s Engineers Gate Manager, and Brandon Haley’s Holocene Advisors.

Let’s go over hedge fund activity in other stocks similar to Insperity Inc (NYSE:NSP). These stocks are Sinclair Broadcast Group, Inc. (NASDAQ:SBGI), Navient Corp (NASDAQ:NAVI), First Financial Bancorp (NASDAQ:FFBC), and The Geo Group, Inc. (NYSE:GEO). This group of stocks’ market caps are similar to NSP’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
SBGI 25 178673 -8
NAVI 33 152856 -5
FFBC 8 8121 3
GEO 14 83253 -8
Average 20 105726 -4.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 20 hedge funds with bullish positions and the average amount invested in these stocks was $106 million. That figure was $154 million in NSP’s case. Navient Corp (NASDAQ:NAVI) is the most popular stock in this table. On the other hand First Financial Bancorp (NASDAQ:FFBC) is the least popular one with only 8 bullish hedge fund positions. Insperity Inc (NYSE:NSP) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 12.3% in 2020 through June 30th but still beat the market by 15.5 percentage points. Hedge funds were also right about betting on NSP as the stock returned 74.8% in Q2 and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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Disclosure: None. This article was originally published at Insider Monkey.