Do Hedge Funds Love, Inc. (SPRT)?

We at Insider Monkey have gone over 821 13F filings that hedge funds and prominent investors are required to file by the SEC The 13F filings show the funds’ and investors’ portfolio positions as of March 31st, near the height of the coronavirus market crash. In this article, we look at what those funds think of, Inc. (NASDAQ:SPRT) based on that data.

Is, Inc. (NASDAQ:SPRT) a cheap investment now? Money managers are turning bullish. The number of bullish hedge fund bets increased by 1 lately. Our calculations also showed that SPRT 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.

So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 more than 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. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.

Chuck Royce

Chuck Royce of Royce & Associates

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out stocks recommended/scorned by legendary Bill Miller. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now let’s take a look at the key hedge fund action surrounding, Inc. (NASDAQ:SPRT).

How are hedge funds trading, Inc. (NASDAQ:SPRT)?

At Q1’s end, a total of 6 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 20% from one quarter earlier. By comparison, 6 hedge funds held shares or bullish call options in SPRT a year ago. With hedge funds’ positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were increasing their holdings meaningfully (or already accumulated large positions).

Among these funds, Fondren Management held the most valuable stake in, Inc. (NASDAQ:SPRT), which was worth $1.4 million at the end of the third quarter. On the second spot was Renaissance Technologies which amassed $1.1 million worth of shares. Citadel Investment Group, Royce & Associates, and Lynrock Lake 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 Fondren Management allocated the biggest weight to, Inc. (NASDAQ:SPRT), around 3.6% of its 13F portfolio. Minerva Advisors is also relatively very bullish on the stock, designating 0.03 percent of its 13F equity portfolio to SPRT.

As one would reasonably expect, some big names were leading the bulls’ herd. Minerva Advisors, managed by David P. Cohen, established the largest position in, Inc. (NASDAQ:SPRT). Minerva Advisors had $0 million invested in the company at the end of the quarter.

Let’s go over hedge fund activity in other stocks similar to, Inc. (NASDAQ:SPRT). We will take a look at PLx Pharma Inc. (NASDAQ:PLXP), U.S. Well Services, Inc. (NASDAQ:USWS), Rubicon Technology, Inc. (NASDAQ:RBCN), and Luby’s, Inc. (NYSE:LUB). This group of stocks’ market caps resemble SPRT’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
PLXP 4 3599 0
USWS 8 1057 -2
RBCN 3 3438 0
LUB 3 2388 0
Average 4.5 2621 -0.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 4.5 hedge funds with bullish positions and the average amount invested in these stocks was $3 million. That figure was $3 million in SPRT’s case. U.S. Well Services, Inc. (NASDAQ:USWS) is the most popular stock in this table. On the other hand Rubicon Technology, Inc. (NASDAQ:RBCN) is the least popular one with only 3 bullish hedge fund positions., Inc. (NASDAQ:SPRT) 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. 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 13.9% in 2020 through June 10th but beat the market by 14.2 percentage points. Unfortunately SPRT wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on SPRT were disappointed as the stock returned 16.5% during the same time period 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 many of these stocks already outperformed the market so far this year.

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