Did Hedge Funds Make The Right Call On The Shyft Group, Inc. (SPAR) ?

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 thoughtThe Shyft Group, Inc. (NASDAQ:SPAR) was a good investment heading into the second quarter and how the stock traded in comparison to the top hedge fund picks.

Is The Shyft Group, Inc. (NASDAQ:SPAR) a healthy stock for your portfolio? Money managers were getting less bullish. The number of long hedge fund bets were trimmed by 1 recently. Our calculations also showed that SPAR 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). SPAR was in 17 hedge funds’ portfolios at the end of the first quarter of 2020. There were 18 hedge funds in our database with SPAR holdings at the end of the previous quarter.

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.

Richard Driehaus of Driehaus Capital

At Insider Monkey we scour multiple sources to uncover the next great investment idea. With Federal Reserve creating trillions of dollars out of thin air, we believe gold prices will keep increasing. So, we are checking out gold stocks like this small gold mining company. We go through lists like the 10 most profitable companies in America to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. Keeping this in mind let’s analyze the key hedge fund action surrounding The Shyft Group, Inc. (NASDAQ:SPAR).

How are hedge funds trading The Shyft Group, Inc. (NASDAQ:SPAR)?

At Q1’s end, a total of 17 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -6% from the fourth quarter of 2019. Below, you can check out the change in hedge fund sentiment towards SPAR over the last 18 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, Royce & Associates was the largest shareholder of The Shyft Group, Inc. (NASDAQ:SPAR), with a stake worth $11.2 million reported as of the end of September. Trailing Royce & Associates was Renaissance Technologies, which amassed a stake valued at $7.3 million. Manatuck Hill Partners, Portolan Capital Management, and G2 Investment Partners Management 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 Manatuck Hill Partners allocated the biggest weight to The Shyft Group, Inc. (NASDAQ:SPAR), around 6.51% of its 13F portfolio. G2 Investment Partners Management is also relatively very bullish on the stock, setting aside 1.71 percent of its 13F equity portfolio to SPAR.

Seeing as The Shyft Group, Inc. (NASDAQ:SPAR) has faced falling interest from hedge fund managers, it’s safe to say that there lies a certain “tier” of money managers that decided to sell off their full holdings in the first quarter. Intriguingly, Israel Englander’s Millennium Management cut the largest stake of the “upper crust” of funds watched by Insider Monkey, worth close to $0.5 million in stock. Donald Sussman’s fund, Paloma Partners, also dropped its stock, about $0.4 million worth. These moves are interesting, as total hedge fund interest fell by 1 funds in the first quarter.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as The Shyft Group, Inc. (NASDAQ:SPAR) but similarly valued. These stocks are Heritage Commerce Corp. (NASDAQ:HTBK), Apollo Medical Holdings, Inc. (NASDAQ:AMEH), Qudian Inc. (NYSE:QD), and Adecoagro SA (NYSE:AGRO). This group of stocks’ market caps resemble SPAR’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
HTBK 9 15364 -4
AMEH 4 2310 0
QD 10 15458 -4
AGRO 14 114033 2
Average 9.25 36791 -1.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 9.25 hedge funds with bullish positions and the average amount invested in these stocks was $37 million. That figure was $58 million in SPAR’s case. Adecoagro SA (NYSE:AGRO) is the most popular stock in this table. On the other hand Apollo Medical Holdings, Inc. (NASDAQ:AMEH) is the least popular one with only 4 bullish hedge fund positions. Compared to these stocks The Shyft Group, Inc. (NASDAQ:SPAR) 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 18.6% in 2020 through July 27th but still managed to beat the market by 17.1 percentage points. Hedge funds were also right about betting on SPAR as the stock returned 37.6% since Q1 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.