Hedge Funds Are Dumping SPS Commerce, Inc. (SPSC)

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 SPS Commerce, Inc. (NASDAQ:SPSC) based on that data.

SPS Commerce, Inc. (NASDAQ:SPSC) was in 16 hedge funds’ portfolios at the end of the first quarter of 2020. SPSC has seen a decrease in activity from the world’s largest hedge funds lately. There were 24 hedge funds in our database with SPSC positions at the end of the previous quarter. Our calculations also showed that SPSC 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.

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At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, we take a look at lists like the 10 largest producers of bauxite to identify emerging trends that are likely to lead to 1000% gains in the coming years. We interview hedge fund managers and ask them about their best ideas. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. For example we are checking out stocks recommended/scorned by legendary Bill Miller. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind let’s go over the latest hedge fund action regarding SPS Commerce, Inc. (NASDAQ:SPSC).

What does smart money think about SPS Commerce, Inc. (NASDAQ:SPSC)?

At Q1’s end, a total of 16 of the hedge funds tracked by Insider Monkey were long this stock, a change of -33% from the fourth quarter of 2019. Below, you can check out the change in hedge fund sentiment towards SPSC over the last 18 quarters. With hedge funds’ sentiment swirling, there exists an “upper tier” of key hedge fund managers who were increasing their stakes significantly (or already accumulated large positions).

Is SPSC A Good Stock To Buy?

Of the funds tracked by Insider Monkey,  Renaissance Technologies has the biggest position in SPS Commerce, Inc. (NASDAQ:SPSC), worth close to $46.3 million, corresponding to less than 0.1%% of its total 13F portfolio. Sitting at the No. 2 spot is D. E. Shaw of D E Shaw, with a $13.8 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Remaining professional money managers that hold long positions encompass Noam Gottesman’s GLG Partners, Israel Englander’s Millennium Management and John Overdeck and David Siegel’s Two Sigma Advisors. In terms of the portfolio weights assigned to each position Prescott Group Capital Management allocated the biggest weight to SPS Commerce, Inc. (NASDAQ:SPSC), around 0.37% of its 13F portfolio. Echo Street Capital Management is also relatively very bullish on the stock, earmarking 0.16 percent of its 13F equity portfolio to SPSC.

Because SPS Commerce, Inc. (NASDAQ:SPSC) has witnessed declining sentiment from the smart money, it’s easy to see that there lies a certain “tier” of funds who sold off their entire stakes by the end of the first quarter. It’s worth mentioning that Cyrus de Weck’s Portsea Asset Management said goodbye to the biggest stake of all the hedgies watched by Insider Monkey, comprising about $36 million in stock, and David Harding’s Winton Capital Management was right behind this move, as the fund said goodbye to about $2.4 million worth. These transactions are important to note, as total hedge fund interest dropped by 8 funds by the end of the first quarter.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as SPS Commerce, Inc. (NASDAQ:SPSC) but similarly valued. We will take a look at Targa Resources Corp (NYSE:TRGP), LATAM Airlines Group S.A. (NYSE:LTM), Capri Holdings Limited (NYSE:CPRI), and Boyd Gaming Corporation (NYSE:BYD). This group of stocks’ market valuations resemble SPSC’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
TRGP 29 104380 2
LTM 10 8139 -4
CPRI 29 280046 -11
BYD 26 179093 -4
Average 23.5 142915 -4.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 23.5 hedge funds with bullish positions and the average amount invested in these stocks was $143 million. That figure was $138 million in SPSC’s case. Targa Resources Corp (NYSE:TRGP) is the most popular stock in this table. On the other hand LATAM Airlines Group S.A. (NYSE:LTM) is the least popular one with only 10 bullish hedge fund positions. SPS Commerce, Inc. (NASDAQ:SPSC) is not the least popular stock in this group but hedge fund interest is still below average. 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 13.3% in 2020 through June 25th and still beat the market by 16.8 percentage points. A small number of hedge funds were also right about betting on SPSC as the stock returned 64.7% during the second quarter and outperformed the market by an even larger margin.

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