Although the masses and most of the financial media blame hedge funds for their exorbitant fee structure and disappointing performance, these investors have proved to have great stock picking abilities over the years (that’s why their assets under management continue to swell). We believe hedge fund sentiment should serve as a crucial tool of an individual investor’s stock selection process, as it may offer great insights of how the brightest minds of the finance industry feel about specific stocks. After all, these people have access to smartest analysts and expensive data/information sources that individual investors can’t match. So should one consider investing in Spark Energy, Inc. (NASDAQ:SPKE)? The smart money sentiment can provide an answer to this question.
Is Spark Energy (SPKE) a good stock to buy now? SPKE shares haven’t seen a lot of action during the second quarter. Overall, hedge fund sentiment was unchanged. The stock was in 7 hedge funds’ portfolios at the end of September. Our calculations also showed that SPKE isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks). 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 Tufin Software Technologies Ltd. (NYSE:TUFN), Fossil Group Inc (NASDAQ:FOSL), and Aspen Aerogels Inc (NYSE:ASPN) to gather more data points.
Video: Watch our video about the top 5 most popular hedge fund stocks.
If you’d ask most shareholders, hedge funds are seen as worthless, outdated investment vehicles of years past. While there are more than 8000 funds with their doors open at present, We hone in on the top tier of this group, around 850 funds. It is estimated that this group of investors control the lion’s share of the smart money’s total asset base, and by monitoring their highest performing stock picks, Insider Monkey has spotted a few investment strategies that have historically outpaced the broader indices. Insider Monkey’s flagship short hedge fund strategy outpaced the S&P 500 short ETFs by around 20 percentage points per annum since its inception in March 2017. Our portfolio of short stocks lost 13% since February 2017 (through November 17th) even though the market was up 65% during the same period. We just shared a list of 6 short targets in our latest quarterly update .
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks 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. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. Now let’s check out the fresh hedge fund action surrounding Spark Energy, Inc. (NASDAQ:SPKE).
How have hedgies been trading Spark Energy, Inc. (NASDAQ:SPKE)?
At the end of September, a total of 7 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the second quarter of 2020. By comparison, 8 hedge funds held shares or bullish call options in SPKE a year ago. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to Insider Monkey’s hedge fund database, Renaissance Technologies has the largest position in Spark Energy, Inc. (NASDAQ:SPKE), worth close to $9.1 million, amounting to less than 0.1%% of its total 13F portfolio. On Renaissance Technologies’s heels is Peter Rathjens, Bruce Clarke and John Campbell of Arrowstreet Capital, with a $1.5 million position; less than 0.1%% of its 13F portfolio is allocated to the stock. Other hedge funds and institutional investors that are bullish consist of Israel Englander’s Millennium Management, Paul Marshall and Ian Wace’s Marshall Wace LLP and Ken Griffin’s Citadel Investment Group. In terms of the portfolio weights assigned to each position Renaissance Technologies allocated the biggest weight to Spark Energy, Inc. (NASDAQ:SPKE), around 0.01% of its 13F portfolio. Arrowstreet Capital is also relatively very bullish on the stock, earmarking 0.0024 percent of its 13F equity portfolio to SPKE.
We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Royce & Associates. 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 Marshall Wace LLP).
Let’s now review hedge fund activity in other stocks similar to Spark Energy, Inc. (NASDAQ:SPKE). These stocks are Tufin Software Technologies Ltd. (NYSE:TUFN), Fossil Group Inc (NASDAQ:FOSL), Aspen Aerogels Inc (NYSE:ASPN), Lydall, Inc. (NYSE:LDL), CRA International, Inc. (NASDAQ:CRAI), Canaan Inc. (NASDAQ:CAN), and Mercantile Bank Corp. (NASDAQ:MBWM). This group of stocks’ market values resemble SPKE’s market value.
|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 8.6 hedge funds with bullish positions and the average amount invested in these stocks was $24 million. That figure was $12 million in SPKE’s case. Lydall, Inc. (NYSE:LDL) is the most popular stock in this table. On the other hand Aspen Aerogels Inc (NYSE:ASPN) is the least popular one with only 5 bullish hedge fund positions. Spark Energy, Inc. (NASDAQ:SPKE) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for SPKE is 36.8. 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 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 31.6% in 2020 through December 2nd and still beat the market by 16 percentage points. A small number of hedge funds were also right about betting on SPKE as the stock returned 10.8% since the end of the third quarter (through 12/2) and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.