Is Spectrum Brands Holdings, Inc. (SPB) Going to Burn These Hedge Funds?

While the market driven by short-term sentiment influenced by the accommodative interest rate environment in the US, virus news and stimulus spending, many smart money investors are starting to get cautious towards the current bull run since March, 2020 and hedging or reducing many of their long positions. Some fund managers are betting on Dow hitting 40,000 to generate strong returns. However, as we know, big investors usually buy stocks with strong fundamentals that can deliver gains both in bull and bear markets, which is why we believe we can profit from imitating them. In this article, we are going to take a look at the smart money sentiment surrounding Spectrum Brands Holdings, Inc. (NYSE:SPB).

Is Spectrum Brands Holdings, Inc. (NYSE:SPB) ready to rally soon? The smart money was in an optimistic mood. The number of long hedge fund positions increased by 2 recently. Spectrum Brands Holdings, Inc. (NYSE:SPB) was in 37 hedge funds’ portfolios at the end of March. The all time high for this statistic is 45. Our calculations also showed that SPB isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 206.8% since March 2017 and outperformed the S&P 500 ETFs by more than 115 percentage points (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best battery stocks to pick the next Tesla that will deliver a 10x return. 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 homepage. Keeping this in mind let’s go over the latest hedge fund action encompassing Spectrum Brands Holdings, Inc. (NYSE:SPB).

Do Hedge Funds Think SPB Is A Good Stock To Buy Now?

Heading into the second quarter of 2021, a total of 37 of the hedge funds tracked by Insider Monkey were long this stock, a change of 6% from the fourth quarter of 2020. By comparison, 24 hedge funds held shares or bullish call options in SPB a year ago. With hedge funds’ positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were increasing their stakes significantly (or already accumulated large positions).

The largest stake in Spectrum Brands Holdings, Inc. (NYSE:SPB) was held by Scopus Asset Management, which reported holding $106.3 million worth of stock at the end of December. It was followed by Pzena Investment Management with a $73.3 million position. Other investors bullish on the company included Cardinal Capital, Millennium Management, and Moerus Capital Management. In terms of the portfolio weights assigned to each position AREX Capital Management allocated the biggest weight to Spectrum Brands Holdings, Inc. (NYSE:SPB), around 19.87% of its 13F portfolio. Moerus Capital Management is also relatively very bullish on the stock, setting aside 17.55 percent of its 13F equity portfolio to SPB.

As aggregate interest increased, key hedge funds were leading the bulls’ herd. Gotham Asset Management, managed by Joel Greenblatt, initiated the largest position in Spectrum Brands Holdings, Inc. (NYSE:SPB). Gotham Asset Management had $0.9 million invested in the company at the end of the quarter. Paul Marshall and Ian Wace’s Marshall Wace LLP also made a $0.5 million investment in the stock during the quarter. The following funds were also among the new SPB investors: Donald Sussman’s Paloma Partners, Ronald Hua’s Qtron Investments, and Bruce Kovner’s Caxton Associates LP.

Let’s also examine hedge fund activity in other stocks similar to Spectrum Brands Holdings, Inc. (NYSE:SPB). These stocks are Kirby Corporation (NYSE:KEX), BanColombia S.A. (NYSE:CIB), Bank of Hawaii Corporation (NYSE:BOH), Reata Pharmaceuticals, Inc. (NASDAQ:RETA), Spirit Airlines Incorporated (NYSE:SAVE), Eastern Bankshares, Inc. (NASDAQ:EBC), and SpringWorks Therapeutics, Inc. (NASDAQ:SWTX). This group of stocks’ market caps match SPB’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 17.9 hedge funds with bullish positions and the average amount invested in these stocks was $373 million. That figure was $618 million in SPB’s case. Reata Pharmaceuticals, Inc. (NASDAQ:RETA) is the most popular stock in this table. On the other hand BanColombia S.A. (NYSE:CIB) is the least popular one with only 3 bullish hedge fund positions. Compared to these stocks Spectrum Brands Holdings, Inc. (NYSE:SPB) is more popular among hedge funds. Our overall hedge fund sentiment score for SPB is 81.7. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 19.3% in 2021 through June 25th and still beat the market by 4.8 percentage points. Unfortunately SPB wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on SPB were disappointed as the stock returned 1% since the end of the first quarter (through 6/25) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market since 2019.

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