Here is What Hedge Funds Think About Speedway Motorsports, Inc. (TRK)

We have been waiting for this for a year and finally the third quarter ended up showing a nice bump in the performance of small-cap stocks. Both the S&P 500 and Russell 2000 were up since the end of the second quarter, but small-cap stocks outperformed the large-cap stocks by double digits. This is important for hedge funds, which are big supporters of small-cap stocks, because their investors started pulling some of their capital out due to poor recent performance. It is very likely that equity hedge funds will deliver better risk adjusted returns in the second half of this year. In this article we are going to look at how this recent market trend affected the sentiment of hedge funds towards Speedway Motorsports, Inc. (NYSE:TRK), and what that likely means for the prospects of the company and its stock.

Speedway Motorsports, Inc. (NYSE:TRK) shares didn’t see a lot of action during the third quarter. Overall, hedge fund sentiment was unchanged. Among the funds we track, the stock was included in 13F portfolios of nine funds at the end of the third quarter. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Piper Jaffray Companies (NYSE:PJC), Silver Spring Networks Inc (NYSE:SSNI), and Pacific Premier Bancorp, Inc. (NASDAQ:PPBI) to gather more data points.

At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.

Keeping this in mind, let’s take a gander at the new action regarding Speedway Motorsports, Inc. (NYSE:TRK).

What have hedge funds been doing with Speedway Motorsports, Inc. (NYSE:TRK)?

At Q3’s end, nine hedge funds tracked by Insider Monkey were bullish on this stock, unchanged from the previous quarter. On the other hand, there were a total of 10 hedge funds with a bullish position in TRK at the beginning of this year. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Marathon Partners, led by Mario Cibelli, holds the most valuable position in Speedway Motorsports, Inc. (NYSE:TRK). Marathon Partners has a $6.3 million position in the stock, comprising 3.1% of its 13F portfolio. Coming in second is Potrero Capital Research, led by Jack Ripsteen, which holds a $4.8 million position; 4.5% of its 13F portfolio is allocated to the stock. Remaining members of the smart money that are bullish encompass Renaissance Technologies, one of the biggest hedge funds in the world, Zeke Ashton’s Centaur Capital Partners, and Mario Gabelli’s GAMCO Investors. We should note that Potrero Capital Research is among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.

We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Gotham Asset Management. One hedge fund selling its entire position doesn’t always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don’t think this is the case in this case because only one of the 800+ hedge funds tracked by Insider Monkey identified as a viable investment and initiated a position in the stock (that fund was Springbok Capital).

Let’s now take a look at hedge fund activity in other stocks similar to Speedway Motorsports, Inc. (NYSE:TRK). These stocks are Piper Jaffray Companies (NYSE:PJC), Silver Spring Networks Inc (NYSE:SSNI), Pacific Premier Bancorp, Inc. (NASDAQ:PPBI), and Novocure Ltd (NASDAQ:NVCR). This group of stocks’ market caps match TRK’s market cap.

As you can see these stocks had an average of 10 funds with bullish positions and the average amount invested in these stocks was $29 million. That figure was $20 million in TRK’s case. Silver Spring Networks Inc (NYSE:SSNI) is the most popular stock in this table. On the other hand Piper Jaffray Companies (NYSE:PJC) is the least popular one with only seven bullish hedge fund positions. Speedway Motorsports, Inc. (NYSE:TRK) 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 SSNI might be a better candidate to consider taking a long position in.

Disclosure: none