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 (see why hell is coming). We reversed our stance on March 25th after seeing unprecedented fiscal and monetary stimulus unleashed by the Fed and the Congress. This is the perfect market for stock pickers, now that the stocks are fully valued again. 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 Sportsman’s Warehouse Holdings Inc (NASDAQ:SPWH) at the end of the second quarter and determine whether the smart money was really smart about this stock.
Sportsman’s Warehouse Holdings Inc (NASDAQ:SPWH) investors should pay attention to an increase in activity from the world’s largest hedge funds recently. Sportsman’s Warehouse Holdings Inc (NASDAQ:SPWH) was in 33 hedge funds’ portfolios at the end of the second quarter of 2020. The all time high for this statistics is 27. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. There were 26 hedge funds in our database with SPWH holdings at the end of March. Our calculations also showed that SPWH isn’t among the 30 most popular stocks among hedge funds (click for Q2 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.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 101% since March 2017 and outperformed the S&P 500 ETFs by more than 56 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, this “mom” trader turned $2000 into $2 million within 2 years. So, we are checking out her best trade idea of the month. Cannabis stocks are roaring back in 2020, which is why we are also checking out this under-the-radar stock. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. With all of this in mind let’s analyze the latest hedge fund action regarding Sportsman’s Warehouse Holdings Inc (NASDAQ:SPWH).
How are hedge funds trading Sportsman’s Warehouse Holdings Inc (NASDAQ:SPWH)?
At the end of June, a total of 33 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 27% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards SPWH over the last 20 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Of the funds tracked by Insider Monkey, Joe Milano’s Greenhouse Funds has the number one position in Sportsman’s Warehouse Holdings Inc (NASDAQ:SPWH), worth close to $27.4 million, corresponding to 4.1% of its total 13F portfolio. Sitting at the No. 2 spot is Cannell Capital, led by J. Carlo Cannell, holding a $23.6 million position; the fund has 8.9% of its 13F portfolio invested in the stock. Other professional money managers that are bullish include George McCabe’s Portolan Capital Management, Angela Aldrich’s Bayberry Capital Partners and Richard Driehaus’s Driehaus Capital. In terms of the portfolio weights assigned to each position Cannell Capital allocated the biggest weight to Sportsman’s Warehouse Holdings Inc (NASDAQ:SPWH), around 8.85% of its 13F portfolio. Greenhouse Funds is also relatively very bullish on the stock, dishing out 4.09 percent of its 13F equity portfolio to SPWH.
Consequently, key money managers were leading the bulls’ herd. Bayberry Capital Partners, managed by Angela Aldrich, created the largest position in Sportsman’s Warehouse Holdings Inc (NASDAQ:SPWH). Bayberry Capital Partners had $15.9 million invested in the company at the end of the quarter. D. E. Shaw’s D E Shaw also initiated a $3.4 million position during the quarter. The other funds with new positions in the stock are Renaissance Technologies, Israel Englander’s Millennium Management, and Mark Broach’s Manatuck Hill Partners.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Sportsman’s Warehouse Holdings Inc (NASDAQ:SPWH) but similarly valued. We will take a look at Liberty Oilfield Services Inc. (NYSE:LBRT), Tutor Perini Corp (NYSE:TPC), Knoll Inc (NYSE:KNL), Invesco Mortgage Capital Inc (NYSE:IVR), Ardelyx Inc (NASDAQ:ARDX), Orthofix Medical Inc (NASDAQ:OFIX), and Tenneco Inc (NYSE:TEN). This group of stocks’ market valuations are similar to SPWH’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 14 hedge funds with bullish positions and the average amount invested in these stocks was $70 million. That figure was $152 million in SPWH’s case. Ardelyx Inc (NASDAQ:ARDX) is the most popular stock in this table. On the other hand Liberty Oilfield Services Inc. (NYSE:LBRT) is the least popular one with only 6 bullish hedge fund positions. Compared to these stocks Sportsman’s Warehouse Holdings Inc (NASDAQ:SPWH) is more popular among hedge funds. Our overall hedge fund sentiment score for SPWH is 90. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. 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 33% in 2020 through the end of August and still beat the market by 23.2 percentage points. Unfortunately SPWH wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on SPWH were disappointed as the stock returned 10.1% since the end of the second 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 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
Disclosure: None. This article was originally published at Insider Monkey.