The market has been volatile as the Federal Reserve continues its rate hikes to normalize the interest rates. Small cap stocks have been hit hard as a result, as the Russell 2000 ETF (IWM) has underperformed the larger S&P 500 ETF (SPY) by about 4 percentage points through November 16th. SEC filings and hedge fund investor letters indicate that the smart money seems to be paring back their overall long exposure since summer months, and the funds’ movements is one of the reasons why the major indexes have retraced. In this article, we analyze what the smart money thinks of Insperity Inc (NYSE:NSP) and find out how it is affected by hedge funds’ moves.
Insperity Inc (NYSE:NSP) was in 16 hedge funds’ portfolios at the end of September. NSP shareholders have witnessed a decrease in enthusiasm from smart money in recent months. There were 21 hedge funds in our database with NSP holdings at the end of the previous quarter. Our calculations also showed that NSP isn’t among the 30 most popular stocks among hedge funds.
If you’d ask most market participants, hedge funds are assumed to be worthless, old investment tools of years past. While there are over 8,000 funds trading today, We choose to focus on the upper echelon of this group, around 700 funds. These money managers control bulk of the smart money’s total capital, and by tracking their matchless stock picks, Insider Monkey has unearthed several investment strategies that have historically exceeded the broader indices. Insider Monkey’s flagship hedge fund strategy defeated the S&P 500 index by 6 percentage points per year since its inception in May 2014 through early November 2018. We were able to generate large returns even by identifying short candidates. Our portfolio of short stocks lost 24% since February 2017 (through December 3rd) even though the market was up nearly 23% during the same period. We just shared a list of 11 short targets in our latest quarterly update.
Cliff Asness of AQR Capital Management
We’re going to go over the new hedge fund action surrounding Insperity Inc (NYSE:NSP).
How are hedge funds trading Insperity Inc (NYSE:NSP)?
At the end of the third quarter, a total of 16 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -24% from the previous quarter. The graph below displays the number of hedge funds with bullish position in NSP over the last 13 quarters. With hedgies’ capital changing hands, there exists an “upper tier” of noteworthy hedge fund managers who were increasing their holdings considerably (or already accumulated large positions).
The largest stake in Insperity Inc (NYSE:NSP) was held by Renaissance Technologies, which reported holding $81.8 million worth of stock at the end of September. It was followed by GLG Partners with a $67.1 million position. Other investors bullish on the company included Arrowstreet Capital, AQR Capital Management, and HBK Investments.
Because Insperity Inc (NYSE:NSP) has experienced a decline in interest from hedge fund managers, we can see that there lies a certain “tier” of hedge funds who were dropping their entire stakes heading into Q3. At the top of the heap, Chuck Royce’s Royce & Associates dropped the largest position of the “upper crust” of funds monitored by Insider Monkey, totaling an estimated $5.1 million in stock, and Matthew Hulsizer’s PEAK6 Capital Management was right behind this move, as the fund dropped about $1.1 million worth. These transactions are important to note, as total hedge fund interest fell by 5 funds heading into Q3.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Insperity Inc (NYSE:NSP) but similarly valued. We will take a look at Blackbaud, Inc. (NASDAQ:BLKB), Pegasystems Inc. (NASDAQ:PEGA), Kirby Corporation (NYSE:KEX), and Highwoods Properties Inc (NYSE:HIW). This group of stocks’ market values match NSP’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| BLKB | 13 | 301993 | -1 |
| PEGA | 22 | 607238 | -1 |
| KEX | 16 | 438146 | -2 |
| HIW | 14 | 188875 | -1 |
| Average | 16.25 | 384063 | -1.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 16.25 hedge funds with bullish positions and the average amount invested in these stocks was $384 million. That figure was $327 million in NSP’s case. Pegasystems Inc. (NASDAQ:PEGA) is the most popular stock in this table. On the other hand Blackbaud, Inc. (NASDAQ:BLKB) is the least popular one with only 13 bullish hedge fund positions. Insperity Inc (NYSE:NSP) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard PEGA might be a better candidate to consider a long position.
Disclosure: None. This article was originally published at Insider Monkey.
