At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (Recession is Imminent: We Need A Travel Ban NOW). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards Spectrum Brands Holdings, Inc. (NYSE:SPB).
Is Spectrum Brands Holdings, Inc. (NYSE:SPB) a buy here? Money managers are becoming less confident. The number of long hedge fund positions fell by 21 recently. Our calculations also showed that SPB 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). SPB was in 24 hedge funds’ portfolios at the end of the first quarter of 2020. There were 45 hedge funds in our database with SPB positions at the end of the previous quarter.
Video: Watch our video about the top 5 most popular hedge fund stocks.
To most stock holders, hedge funds are seen as unimportant, old financial tools of yesteryear. While there are over 8000 funds in operation at the moment, Our researchers look at the upper echelon of this group, approximately 850 funds. It is estimated that this group of investors preside over the majority of the hedge fund industry’s total asset base, and by keeping an eye on their first-class equity investments, Insider Monkey has unsheathed a number of investment strategies that have historically outstripped Mr. Market. Insider Monkey’s flagship short hedge fund strategy outpaced the S&P 500 short ETFs by around 20 percentage points per year since its inception in March 2017. Our portfolio of short stocks lost 36% since February 2017 (through May 18th) even though the market was up 30% during the same period. We just shared a list of 8 short targets in our latest quarterly update .
We leave no stone unturned when looking for the next great investment idea. For example, we believe electric vehicles and energy storage are set to become giant markets, and we want to take advantage of the declining lithium prices amid the COVID-19 pandemic. So we are checking out investment opportunities like these. 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. Keeping this in mind we’re going to view the fresh hedge fund action regarding Spectrum Brands Holdings, Inc. (NYSE:SPB).
What does smart money think about Spectrum Brands Holdings, Inc. (NYSE:SPB)?
Heading into the second quarter of 2020, a total of 24 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -47% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards SPB over the last 18 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
When looking at the institutional investors followed by Insider Monkey, Allan Mecham’s Arlington Value Capital has the number one position in Spectrum Brands Holdings, Inc. (NYSE:SPB), worth close to $63.6 million, accounting for 9.2% of its total 13F portfolio. The second most bullish fund manager is Pzena Investment Management, managed by Richard S. Pzena, which holds a $47.8 million position; the fund has 0.4% of its 13F portfolio invested in the stock. Some other members of the smart money that hold long positions encompass Amit Wadhwaney’s Moerus Capital Management, Cliff Asness’s AQR Capital Management and Jeffrey Bronchick’s Cove Street Capital. In terms of the portfolio weights assigned to each position Moerus Capital Management allocated the biggest weight to Spectrum Brands Holdings, Inc. (NYSE:SPB), around 12.98% of its 13F portfolio. AREX Capital Management is also relatively very bullish on the stock, designating 10.65 percent of its 13F equity portfolio to SPB.
Because Spectrum Brands Holdings, Inc. (NYSE:SPB) has faced a decline in interest from the aggregate hedge fund industry, it’s easy to see that there were a few fund managers who sold off their positions entirely in the first quarter. It’s worth mentioning that Jack Woodruff’s Candlestick Capital Management dumped the largest position of all the hedgies tracked by Insider Monkey, valued at an estimated $33.1 million in stock. fund, Renaissance Technologies, also dropped its stock, about $15.4 million worth. These moves are important to note, as total hedge fund interest fell by 21 funds in the first quarter.
Let’s now take a look at hedge fund activity in other stocks similar to Spectrum Brands Holdings, Inc. (NYSE:SPB). We will take a look at LCI Industries (NYSE:LCII), Moog Inc (NYSE:MOG), Atlas Corp. (NYSE:ATCO), and CVR Energy, Inc. (NYSE:CVI). This group of stocks’ market valuations resemble SPB’s market valuation.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 16.75 hedge funds with bullish positions and the average amount invested in these stocks was $546 million. That figure was $208 million in SPB’s case. Moog Inc (NYSE:MOG) is the most popular stock in this table. On the other hand Atlas Corp. (NYSE:ATCO) is the least popular one with only 13 bullish hedge fund positions. Compared to these stocks Spectrum Brands Holdings, Inc. (NYSE:SPB) 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 13.9% in 2020 through June 10th but still managed to beat the market by 14.2 percentage points. Hedge funds were also right about betting on SPB as the stock returned 32.8% so far in Q2 (through June 10th) 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.
Disclosure: None. This article was originally published at Insider Monkey.