We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: AQR Capital 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 here because none of the 700+ hedge funds tracked by Insider Monkey identified SPA as a viable investment and initiated a position in the stock.
Let’s now take a look at hedge fund activity in other stocks similar to Sparton Corporation (NYSE:SPA). We will take a look at Johnson Outdoors Inc. (NASDAQ:JOUT), Western Asset Managed High Incm Fnd Inc. (NYSE:MHY), Castle Brands Inc (NYSEMKT:ROX), and ChinaCache Internatnl Hldgs Ltd (ADR) (NASDAQ:CCIH). This group of stocks’ market valuations matches Sparton Corporation (NYSE:SPA)’s market valuation.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
As you can see, these stocks had an average of 5 hedge funds with bullish positions and the average amount invested in these stocks was $10 million. That figure was $20 million in Sparton Corporation (NYSE:SPA)’s case. Western Asset Managed High Incm Fnd Inc. (NYSE:MHY) is the most popular stock in this table. On the other hand, Johnson Outdoors Inc. (NASDAQ:JOUT) is the least popular one with only 4 bullish hedge fund positions. Sparton Corporation (NYSE:SPA) is not the most popular stock in this group, but hedge fund interest is still above average. This is a slightly positive signal, but we’d rather spend our time researching stocks that hedge funds are piling on. In this regard, Western Asset Managed High Incm Fnd Inc. (NYSE:MHY) might be a better candidate to consider a long position.