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Insperity Inc (NSP): Hedge Funds In Wait-and-See Mode

Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the second quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 5 years and analyze what the smart money thinks of Insperity Inc (NYSE:NSP) based on that data and determine whether they were really smart about the stock.

Hedge fund interest in Insperity Inc (NYSE:NSP) shares was flat at the end of last quarter. This is usually a negative indicator. Our calculations also showed that NSP 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). At the end of this article we will also compare NSP to other stocks including Taylor Morrison Home Corp (NYSE:TMHC), UMB Financial Corporation (NASDAQ:UMBF), and Crocs, Inc. (NASDAQ:CROX) to get a better sense of its popularity.

Video: 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 S&P 500 ETFs by 58 percentage points since March 2017 (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.

Paul Marshall Marshall Wace

Paul Marshall of Marshall Wace

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. 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. Keeping this in mind let’s take a peek at the latest hedge fund action surrounding Insperity Inc (NYSE:NSP).

How have hedgies been trading Insperity Inc (NYSE:NSP)?

Heading into the third quarter of 2020, a total of 29 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards NSP over the last 20 quarters. With the smart money’s positions undergoing their usual ebb and flow, there exists an “upper tier” of notable hedge fund managers who were upping their stakes meaningfully (or already accumulated large positions).

Among these funds, Lakewood Capital Management held the most valuable stake in Insperity Inc (NYSE:NSP), which was worth $70.5 million at the end of the third quarter. On the second spot was Marshall Wace LLP which amassed $49.2 million worth of shares. Sunriver Management, No Street Capital, and Renaissance Technologies were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Billings Capital Management allocated the biggest weight to Insperity Inc (NYSE:NSP), around 6.09% of its 13F portfolio. Soapstone Capital is also relatively very bullish on the stock, setting aside 5.6 percent of its 13F equity portfolio to NSP.

Seeing as Insperity Inc (NYSE:NSP) has faced declining sentiment from hedge fund managers, logic holds that there exists a select few fund managers who sold off their full holdings in the second quarter. Intriguingly, Larry Robbins’s Glenview Capital cut the largest position of the 750 funds watched by Insider Monkey, valued at an estimated $16.4 million in stock. Steve Cohen’s fund, Point72 Asset Management, also said goodbye to its stock, about $1.9 million worth. These moves are intriguing to say the least, as total hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s check out hedge fund activity in other stocks similar to Insperity Inc (NYSE:NSP). We will take a look at Taylor Morrison Home Corp (NYSE:TMHC), UMB Financial Corporation (NASDAQ:UMBF), Crocs, Inc. (NASDAQ:CROX), Ovintiv Inc. (NYSE:OVV), Brookfield Business Partners L.P. (NYSE:BBU), TreeHouse Foods Inc. (NYSE:THS), and Vonage Holdings Corp. (NASDAQ:VG). This group of stocks’ market valuations match NSP’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
TMHC 33 370179 5
UMBF 15 69356 0
CROX 37 634166 12
OVV 16 99529 -3
BBU 3 1285 1
THS 32 223246 4
VG 30 257523 5
Average 23.7 236469 3.4

View table here if you experience formatting issues.

As you can see these stocks had an average of 23.7 hedge funds with bullish positions and the average amount invested in these stocks was $236 million. That figure was $281 million in NSP’s case. Crocs, Inc. (NASDAQ:CROX) is the most popular stock in this table. On the other hand Brookfield Business Partners L.P. (NYSE:BBU) is the least popular one with only 3 bullish hedge fund positions. Insperity Inc (NYSE:NSP) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for NSP is 73.2. 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. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. 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 23.8% in 2020 through September 14th and beat the market by 17.6 percentage points. Unfortunately NSP wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on NSP were disappointed as the stock returned 3.1% during the same time period 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 many of these stocks already outperformed the market so far this year.

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