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Hedge Funds Are Dipping Their Toes Into Spirit AeroSystems Holdings, Inc. (SPR)

We are still in an overall bull market and many stocks that smart money investors were piling into surged through the end of November. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 54% and 51% respectively. Hedge funds’ top 3 stock picks returned 41.7% this year and beat the S&P 500 ETFs by 14 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like Spirit AeroSystems Holdings, Inc. (NYSE:SPR).

Spirit AeroSystems Holdings, Inc. (NYSE:SPR) shareholders have witnessed an increase in activity from the world’s largest hedge funds in recent months. SPR was in 36 hedge funds’ portfolios at the end of the third quarter of 2019. There were 31 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 Q3 rankings and see the video below for Q2 rankings).
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to 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’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (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 27.8% through November 21, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

David E. Shaw of D.E. Shaw

David E. Shaw of D.E. Shaw

Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world’s most bearish hedge fund that’s more convinced than ever that a crash is coming, our long-short investment strategy doesn’t rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds‘ buy/sell signals. Let’s check out the key hedge fund action surrounding Spirit AeroSystems Holdings, Inc. (NYSE:SPR).

How have hedgies been trading Spirit AeroSystems Holdings, Inc. (NYSE:SPR)?

At Q3’s end, a total of 36 of the hedge funds tracked by Insider Monkey were long this stock, a change of 16% from one quarter earlier. By comparison, 32 hedge funds held shares or bullish call options in SPR a year ago. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

No of Hedge Funds with SPR Positions

The largest stake in Spirit AeroSystems Holdings, Inc. (NYSE:SPR) was held by Darsana Capital Partners, which reported holding $489.4 million worth of stock at the end of September. It was followed by AQR Capital Management with a $398.1 million position. Other investors bullish on the company included Sculptor Capital, Scopia Capital, and D E Shaw. In terms of the portfolio weights assigned to each position Darsana Capital Partners allocated the biggest weight to Spirit AeroSystems Holdings, Inc. (NYSE:SPR), around 18.14% of its portfolio. Scopia Capital is also relatively very bullish on the stock, dishing out 13.03 percent of its 13F equity portfolio to SPR.

Consequently, key money managers have been driving this bullishness. Crescent Park Management, managed by Eli Cohen, initiated the biggest position in Spirit AeroSystems Holdings, Inc. (NYSE:SPR). Crescent Park Management had $36.1 million invested in the company at the end of the quarter. Ryan Pedlow’s Two Creeks Capital Management also initiated a $26.7 million position during the quarter. The other funds with brand new SPR positions are Phill Gross and Robert Atchinson’s Adage Capital Management, Sander Gerber’s Hudson Bay Capital Management, and Alexander Mitchell’s Scopus Asset Management.

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. These stocks are F5 Networks, Inc. (NASDAQ:FFIV), The Trade Desk, Inc. (NASDAQ:TTD), Ionis Pharmaceuticals, Inc. (NASDAQ:IONS), and Nordson Corporation (NASDAQ:NDSN). All of these stocks’ market caps resemble SPR’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
FFIV 22 1179111 -1
TTD 25 388607 1
IONS 25 379230 7
NDSN 15 43658 -2
Average 21.75 497652 1.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 21.75 hedge funds with bullish positions and the average amount invested in these stocks was $498 million. That figure was $2062 million in SPR’s case. The Trade Desk, Inc. (NASDAQ:TTD) is the most popular stock in this table. On the other hand Nordson Corporation (NASDAQ:NDSN) is the least popular one with only 15 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 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately SPR wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on SPR were disappointed as the stock returned 5.8% during the first two months of the fourth 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 20 most popular stocks among hedge funds as 70 percent of these stocks already outperformed the market in Q4.

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

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