Hedge Funds Are Dumping Superior Industries International Inc. (SUP)

How do you pick the next stock to invest in? One way would be to spend days of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don’t always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding Superior Industries International Inc. (NYSE:SUP) and determine whether hedge funds had an edge regarding this stock.

Superior Industries International Inc. (NYSE:SUP) shareholders have witnessed a decrease in enthusiasm from smart money of late. Our calculations also showed that SUP 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.

Today there are tons of tools stock market investors put to use to assess their stock investments. A couple of the most innovative tools are hedge fund and insider trading moves. Our experts have shown that, historically, those who follow the best picks of the best investment managers can outclass the market by a significant margin (see the details here).

Mario Gabelli of GAMCO Investors

At Insider Monkey we scour multiple sources to uncover the next great investment idea. There is a lot of volatility in the markets and this presents amazing investment opportunities from time to time. For example, this trader claims to deliver juiced up returns with one trade a week, so we are checking out his highest conviction idea. A second trader claims to score lucrative profits by utilizing a “weekend trading strategy”, so we look into his strategy’s picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We recently recommended several stocks partly inspired by legendary Bill Miller’s investor letter. 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. Now we’re going to take a look at the recent hedge fund action surrounding Superior Industries International Inc. (NYSE:SUP).

What have hedge funds been doing with Superior Industries International Inc. (NYSE:SUP)?

At Q1’s end, a total of 12 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -14% from the previous quarter. The graph below displays the number of hedge funds with bullish position in SUP over the last 18 quarters. With the smart money’s sentiment swirling, there exists a few notable hedge fund managers who were increasing their stakes meaningfully (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, Douglas Dethy’s DC Capital Partners has the biggest position in Superior Industries International Inc. (NYSE:SUP), worth close to $1.4 million, accounting for 9.6% of its total 13F portfolio. The second most bullish fund manager is Millennium Management, led by Israel Englander, holding a $1 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Other hedge funds and institutional investors with similar optimism include Mario Gabelli’s GAMCO Investors, Renaissance Technologies and D. E. Shaw’s D E Shaw. In terms of the portfolio weights assigned to each position DC Capital Partners allocated the biggest weight to Superior Industries International Inc. (NYSE:SUP), around 9.6% of its 13F portfolio. Paloma Partners is also relatively very bullish on the stock, dishing out 0.01 percent of its 13F equity portfolio to SUP.

Since Superior Industries International Inc. (NYSE:SUP) has witnessed a decline in interest from the aggregate hedge fund industry, we can see that there lies a certain “tier” of hedge funds that elected to cut their positions entirely heading into Q4. It’s worth mentioning that Paul Marshall and Ian Wace’s Marshall Wace LLP sold off the largest stake of the “upper crust” of funds watched by Insider Monkey, comprising about $1 million in stock. Noam Gottesman’s fund, GLG Partners, also dropped its stock, about $0.1 million worth. These transactions are important to note, as total hedge fund interest was cut by 2 funds heading into Q4.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Superior Industries International Inc. (NYSE:SUP) but similarly valued. These stocks are Tantech Holdings Ltd. (NASDAQ:TANH), Mohawk Group Holdings, Inc. (NASDAQ:MWK), Kopin Corporation (NASDAQ:KOPN), and Mediaco Holding Inc. (NASDAQ:MDIA). All of these stocks’ market caps are closest to SUP’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
TANH 2 548 0
MWK 2 1386 0
KOPN 4 915 0
MDIA 2 474 2
Average 2.5 831 0.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 2.5 hedge funds with bullish positions and the average amount invested in these stocks was $1 million. That figure was $5 million in SUP’s case. Kopin Corporation (NASDAQ:KOPN) is the most popular stock in this table. On the other hand Tantech Holdings Ltd. (NASDAQ:TANH) is the least popular one with only 2 bullish hedge fund positions. Compared to these stocks Superior Industries International Inc. (NYSE:SUP) 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 12.3% in 2020 through June 30th but still managed to beat the market by 15.5 percentage points. Hedge funds were also right about betting on SUP as the stock returned 41.7% in Q2 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.