Is Spirit AeroSystems Holdings, Inc. (SPR) A Good Stock To Buy?

Investing in small cap stocks has historically been a way to outperform the market, as small cap companies typically grow faster on average than the blue chips. That outperformance comes with a price, however, as there are occasional periods of higher volatility. The last 8 months is one of those periods, as the Russell 2000 ETF (IWM) has underperformed the larger S&P 500 ETF (SPY) by nearly 9 percentage points. Given that the funds we track tend to have a disproportionate amount of their portfolios in smaller cap stocks, they have seen some volatility in their portfolios too. Actually their moves are potentially one of the factors that contributed to this volatility. In this article, we use our extensive database of hedge fund holdings to find out what the smart money thinks of Spirit AeroSystems Holdings, Inc. (NYSE:SPR).

Is Spirit AeroSystems Holdings, Inc. (NYSE:SPR) a healthy stock for your portfolio? Money managers are reducing their bets on the stock. The number of bullish hedge fund bets dropped by 3 lately. Our calculations also showed that spr isn’t among the 30 most popular stocks among hedge funds.

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 flagship best performing hedge funds strategy returned 25.8% year to date (through May 30th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 40 percentage points since its inception (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.


Cliff Asness of AQR Capital Management

We’re going to take a glance at the key hedge fund action surrounding Spirit AeroSystems Holdings, Inc. (NYSE:SPR).

How are hedge funds trading Spirit AeroSystems Holdings, Inc. (NYSE:SPR)?

Heading into the second quarter of 2019, a total of 29 of the hedge funds tracked by Insider Monkey were long this stock, a change of -9% from the fourth quarter of 2018. Below, you can check out the change in hedge fund sentiment towards SPR over the last 15 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

No of Hedge Funds with SPR Positions

Among these funds, Darsana Capital Partners held the most valuable stake in Spirit AeroSystems Holdings, Inc. (NYSE:SPR), which was worth $549.2 million at the end of the first quarter. On the second spot was AQR Capital Management which amassed $425.9 million worth of shares. Moreover, OZ Management, Hound Partners, and Scopia Capital were also bullish on Spirit AeroSystems Holdings, Inc. (NYSE:SPR), allocating a large percentage of their portfolios to this stock.

Because Spirit AeroSystems Holdings, Inc. (NYSE:SPR) has witnessed bearish sentiment from hedge fund managers, logic holds that there lies a certain “tier” of money managers that decided to sell off their full holdings last quarter. Interestingly, Alok Agrawal’s Bloom Tree Partners dumped the largest stake of the “upper crust” of funds monitored by Insider Monkey, totaling about $29.4 million in stock, and Steve Cohen’s Point72 Asset Management was right behind this move, as the fund said goodbye to about $27.9 million worth. These moves are important to note, as aggregate hedge fund interest dropped by 3 funds last quarter.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Spirit AeroSystems Holdings, Inc. (NYSE:SPR) but similarly valued. These stocks are AGNC Investment Corp. (NASDAQ:AGNC), Targa Resources Corp (NYSE:TRGP), UGI Corp (NYSE:UGI), and Avery Dennison Corporation (NYSE:AVY). All of these stocks’ market caps are similar to SPR’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
AGNC 15 233055 -6
TRGP 23 334534 -12
UGI 20 441954 -4
AVY 23 314167 -5
Average 20.25 330928 -6.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 20.25 hedge funds with bullish positions and the average amount invested in these stocks was $331 million. That figure was $2186 million in SPR’s case. Targa Resources Corp (NYSE:TRGP) is the most popular stock in this table. On the other hand AGNC Investment Corp. (NASDAQ:AGNC) is the least popular one with only 15 bullish hedge fund positions. Compared to these stocks Spirit AeroSystems Holdings, Inc. (NYSE:SPR) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 1.9% in Q2 through May 30th and outperformed the S&P 500 ETF (SPY) by more than 3 percentage points. Unfortunately SPR wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on SPR were disappointed as the stock returned -11% during the same 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 20 most popular stocks among hedge funds as 13 of these stocks already outperformed the market in Q2.

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