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Did Hedge Funds Make The Right Call On Sportsman’s Warehouse Holdings Inc (SPWH) ?

Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the first quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 4.5 years and analyze what the smart money thinks of Sportsman’s Warehouse Holdings Inc (NASDAQ:SPWH) based on that data and determine whether they were really smart about the stock.

Sportsman’s Warehouse Holdings Inc (NASDAQ:SPWH) was in 26 hedge funds’ portfolios at the end of March. SPWH has seen a decrease in activity from the world’s largest hedge funds recently. There were 27 hedge funds in our database with SPWH positions at the end of the previous quarter. Our calculations also showed that SPWH 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.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Carlo Cannell

J. Carlo Cannell of Cannell Capital

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 review the latest hedge fund action regarding Sportsman’s Warehouse Holdings Inc (NASDAQ:SPWH).

How are hedge funds trading Sportsman’s Warehouse Holdings Inc (NASDAQ:SPWH)?

At Q1’s end, a total of 26 of the hedge funds tracked by Insider Monkey were long this stock, a change of -4% from the previous quarter. The graph below displays the number of hedge funds with bullish position in SPWH over the last 18 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in Sportsman’s Warehouse Holdings Inc (NASDAQ:SPWH) was held by Cannell Capital, which reported holding $17.6 million worth of stock at the end of September. It was followed by Greenhouse Funds with a $12.8 million position. Other investors bullish on the company included Driehaus Capital, Marshall Wace LLP, and Arrowstreet Capital. In terms of the portfolio weights assigned to each position Cannell Capital allocated the biggest weight to Sportsman’s Warehouse Holdings Inc (NASDAQ:SPWH), around 7.34% of its 13F portfolio. Greenhouse Funds is also relatively very bullish on the stock, dishing out 3.1 percent of its 13F equity portfolio to SPWH.

Due to the fact that Sportsman’s Warehouse Holdings Inc (NASDAQ:SPWH) has experienced bearish sentiment from hedge fund managers, it’s easy to see that there exists a select few money managers who were dropping their full holdings in the first quarter. At the top of the heap, Michael Burry’s Scion Asset Management dumped the biggest investment of the “upper crust” of funds watched by Insider Monkey, comprising close to $5.5 million in stock, and D. E. Shaw’s D E Shaw was right behind this move, as the fund dropped about $4.8 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest was cut by 1 funds in the first quarter.

Let’s now take a look at hedge fund activity in other stocks similar to Sportsman’s Warehouse Holdings Inc (NASDAQ:SPWH). We will take a look at Landmark Infrastructure Partners LP (NASDAQ:LMRK), Equity Bancshares, Inc. (NASDAQ:EQBK), CRA International, Inc. (NASDAQ:CRAI), and Pure Cycle Corporation (NASDAQ:PCYO). All of these stocks’ market caps are closest to SPWH’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
LMRK 1 894 -1
EQBK 5 24525 0
CRAI 11 33945 -3
PCYO 14 39645 4
Average 7.75 24752 0

View table here if you experience formatting issues.

As you can see these stocks had an average of 7.75 hedge funds with bullish positions and the average amount invested in these stocks was $25 million. That figure was $64 million in SPWH’s case. Pure Cycle Corporation (NASDAQ:PCYO) is the most popular stock in this table. On the other hand Landmark Infrastructure Partners LP (NASDAQ:LMRK) is the least popular one with only 1 bullish hedge fund positions. Compared to these stocks Sportsman’s Warehouse Holdings Inc (NASDAQ:SPWH) 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 returned 12.3% in 2020 through June 30th but still managed to beat the market by 15.5 percentage points. Hedge funds were also right about betting on SPWH as the stock returned 131.3% in Q2 and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.

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