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Did Hedge Funds Make The Right Call On Spirit AeroSystems Holdings, Inc. (SPR)?

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at 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. 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 we look at how hedge funds traded Spirit AeroSystems Holdings, Inc. (NYSE:SPR) and determine whether the smart money was really smart about this stock.

Spirit AeroSystems Holdings, Inc. (NYSE:SPR) investors should pay attention to a decrease in activity from the world’s largest hedge funds in recent months. SPR was in 38 hedge funds’ portfolios at the end of March. There were 48 hedge funds in our database with SPR positions at the end of the previous quarter. Our calculations also showed that SPR 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.

In today’s marketplace there are numerous indicators stock traders use to appraise publicly traded companies. Some of the less utilized indicators are hedge fund and insider trading moves. We have shown that, historically, those who follow the best picks of the best money managers can trounce the market by a superb amount (see the details here).

Jeffrey Altman Owl Creek

Jeffrey Altman of Owl Creek Asset Management

At Insider Monkey we scour multiple sources to uncover the next great investment idea. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Hedge fund sentiment towards Tesla reached its all time high at the end of 2019 and Tesla shares more than tripled this year. We are trying to identify other EV revolution winners, so we are checking out this tiny lithium stock. With all of this in mind let’s check out the recent hedge fund action regarding Spirit AeroSystems Holdings, Inc. (NYSE:SPR).

What have hedge funds been doing with Spirit AeroSystems Holdings, Inc. (NYSE:SPR)?

At Q1’s end, a total of 38 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -21% from the fourth quarter of 2019. On the other hand, there were a total of 29 hedge funds with a bullish position in SPR a year ago. With hedgies’ sentiment swirling, there exists a select group of noteworthy hedge fund managers who were adding to their stakes significantly (or already accumulated large positions).

Is SPR A Good Stock To Buy?

Among these funds, Darsana Capital Partners held the most valuable stake in Spirit AeroSystems Holdings, Inc. (NYSE:SPR), which was worth $197.7 million at the end of the third quarter. On the second spot was OZ Management which amassed $120.2 million worth of shares. Scopia Capital, AQR Capital Management, and D E Shaw were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Scopia Capital allocated the biggest weight to Spirit AeroSystems Holdings, Inc. (NYSE:SPR), around 9.77% of its 13F portfolio. Darsana Capital Partners is also relatively very bullish on the stock, earmarking 9.35 percent of its 13F equity portfolio to SPR.

Since Spirit AeroSystems Holdings, Inc. (NYSE:SPR) has witnessed bearish sentiment from the smart money, it’s easy to see that there were a few fund managers who were dropping their entire stakes by the end of the first quarter. Intriguingly, Jeffrey Altman’s Owl Creek Asset Management cut the biggest position of the 750 funds monitored by Insider Monkey, totaling about $18.6 million in stock, and James Woodson Davis’s Woodson Capital Management was right behind this move, as the fund dropped about $10.2 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest was cut by 10 funds by the end of the first quarter.

Let’s go over 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 First Horizon National Corporation (NYSE:FHN), MasTec, Inc. (NYSE:MTZ), AutoNation, Inc. (NYSE:AN), and Avnet, Inc. (NYSE:AVT). This group of stocks’ market valuations are similar to SPR’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
FHN 31 242866 4
MTZ 24 99669 -17
AN 27 256418 -4
AVT 24 453381 -9
Average 26.5 263084 -6.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 26.5 hedge funds with bullish positions and the average amount invested in these stocks was $263 million. That figure was $746 million in SPR’s case. First Horizon National Corporation (NYSE:FHN) is the most popular stock in this table. On the other hand MasTec, Inc. (NYSE:MTZ) is the least popular one with only 24 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 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 and still beat the market by 15.5 percentage points. Unfortunately SPR wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on SPR were disappointed as the stock returned 0.1% during the second quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.

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