Here’s What Hedge Funds Think About, Inc. (SPRT)

We are still in an overall bull market and many stocks that smart money investors were piling into surged through the end of November. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 54% and 51% respectively. Hedge funds’ top 3 stock picks returned 41.7% this year and beat the S&P 500 ETFs by 14 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like, Inc. (NASDAQ:SPRT).

Is, Inc. (NASDAQ:SPRT) an outstanding investment right now? Prominent investors are getting more optimistic. The number of bullish hedge fund positions improved by 1 in recent months. Our calculations also showed that SPRT isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). SPRT was in 5 hedge funds’ portfolios at the end of the third quarter of 2019. There were 4 hedge funds in our database with SPRT positions at the end of the previous quarter.
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.


Jim Simons of Renaissance Technologies

We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We even check out this option genius’ weekly trade ideas. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager’s investor letter and the stock already gained 20 percent. With all of this in mind let’s analyze the latest hedge fund action surrounding, Inc. (NASDAQ:SPRT).

How are hedge funds trading, Inc. (NASDAQ:SPRT)?

At the end of the third quarter, a total of 5 of the hedge funds tracked by Insider Monkey were long this stock, a change of 25% from the second quarter of 2019. Below, you can check out the change in hedge fund sentiment towards SPRT over the last 17 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is SPRT A Good Stock To Buy?

The largest stake in, Inc. (NASDAQ:SPRT) was held by Fondren Management, which reported holding $2 million worth of stock at the end of September. It was followed by Renaissance Technologies with a $1.6 million position. Other investors bullish on the company included Solas Capital Management, Royce & Associates, and Lynrock Lake. In terms of the portfolio weights assigned to each position Fondren Management allocated the biggest weight to, Inc. (NASDAQ:SPRT), around 1.67% of its 13F portfolio. Solas Capital Management is also relatively very bullish on the stock, earmarking 1.48 percent of its 13F equity portfolio to SPRT.

There weren’t any hedge funds initiating brand new positions in the stock during the third quarter.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as, Inc. (NASDAQ:SPRT) but similarly valued. These stocks are Manning and Napier Inc (NYSE:MN), Sierra Oncology, Inc. (NASDAQ:SRRA), Hornbeck Offshore Services, Inc. (NYSE:HOS), and Chesapeake Granite Wash Trust (NYSE:CHKR). This group of stocks’ market valuations resemble SPRT’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
MN 8 6162 1
SRRA 12 11329 0
HOS 13 10806 0
CHKR 2 19 0
Average 8.75 7079 0.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 8.75 hedge funds with bullish positions and the average amount invested in these stocks was $7 million. That figure was $6 million in SPRT’s case. Hornbeck Offshore Services, Inc. (NYSE:HOS) is the most popular stock in this table. On the other hand Chesapeake Granite Wash Trust (NYSE:CHKR) is the least popular one with only 2 bullish hedge fund positions., Inc. (NASDAQ:SPRT) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. A small number of hedge funds were also right about betting on SPRT as the stock returned 26.6% during the first two months of Q4 and outperformed the market by an even larger margin.

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