Is SPWR A Good Stock To Buy Now?

Our extensive research has shown that imitating the smart money can generate significant returns for retail investors, which is why we track nearly 817 active prominent money managers and analyze their quarterly 13F filings. The stocks that are heavily bought by hedge funds historically outperformed the market, though there is no shortage of high profile failures like hedge funds’ 2018 losses in Facebook and Apple. Let’s take a closer look at what the funds we track think about SunPower Corporation (NASDAQ:SPWR) in this article.

Is SPWR a good stock to buy now? Hedge funds were becoming less confident. The number of bullish hedge fund positions were cut by 2 recently. SunPower Corporation (NASDAQ:SPWR) was in 14 hedge funds’ portfolios at the end of September. The all time high for this statistic is 22. Our calculations also showed that SPWR 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). There were 16 hedge funds in our database with SPWR positions at the end of the second quarter.

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 66 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.

Philip Hempleman Ardsley Partners

Philip Hempleman of Ardsley Partners

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 we’re going to check out the latest hedge fund action regarding SunPower Corporation (NASDAQ:SPWR).

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

At the end of the third quarter, a total of 14 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -13% from the previous quarter. By comparison, 17 hedge funds held shares or bullish call options in SPWR a year ago. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Ken Griffin’s Citadel Investment Group has the most valuable position in SunPower Corporation (NASDAQ:SPWR), worth close to $34.1 million, accounting for less than 0.1%% of its total 13F portfolio. Coming in second is D E Shaw, managed by D. E. Shaw, which holds a $27.5 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Remaining professional money managers with similar optimism contain Jos Shaver’s Electron Capital Partners, Israel Englander’s Millennium Management and Peter Muller’s PDT Partners. In terms of the portfolio weights assigned to each position Electron Capital Partners allocated the biggest weight to SunPower Corporation (NASDAQ:SPWR), around 0.49% of its 13F portfolio. PDT Partners is also relatively very bullish on the stock, dishing out 0.32 percent of its 13F equity portfolio to SPWR.

Judging by the fact that SunPower Corporation (NASDAQ:SPWR) has witnessed a decline in interest from hedge fund managers, logic holds that there exists a select few money managers who sold off their positions entirely in the third quarter. Intriguingly, Steve Cohen’s Point72 Asset Management dropped the biggest stake of the “upper crust” of funds tracked by Insider Monkey, valued at an estimated $6.4 million in stock. Bruce Kovner’s fund, Caxton Associates LP, also dumped its stock, about $5.6 million worth. These moves are important to note, as aggregate hedge fund interest was cut by 2 funds in the third quarter.

Let’s now review hedge fund activity in other stocks similar to SunPower Corporation (NASDAQ:SPWR). These stocks are Mesoblast Limited (NASDAQ:MESO), iRobot Corporation (NASDAQ:IRBT), Zymeworks Inc. (NYSE:ZYME), Extended Stay America Inc (NASDAQ:STAY), Ovintiv Inc. (NYSE:OVV), HMS Holdings Corp. (NASDAQ:HMSY), and Hillenbrand, Inc. (NYSE:HI). This group of stocks’ market valuations are similar to SPWR’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
MESO 3 2921 0
IRBT 25 162591 3
ZYME 29 748757 -2
STAY 23 276413 -7
OVV 20 86209 4
HMSY 26 86934 10
HI 14 93430 2
Average 20 208179 1.4

View table here if you experience formatting issues.

As you can see these stocks had an average of 20 hedge funds with bullish positions and the average amount invested in these stocks was $208 million. That figure was $91 million in SPWR’s case. Zymeworks Inc. (NYSE:ZYME) is the most popular stock in this table. On the other hand Mesoblast Limited (NASDAQ:MESO) is the least popular one with only 3 bullish hedge fund positions. SunPower Corporation (NASDAQ:SPWR) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for SPWR is 43.2. 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. 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 32.9% in 2020 through December 8th and still beat the market by 16.2 percentage points. A small number of hedge funds were also right about betting on SPWR as the stock returned 77.3% since the end of the third quarter (through 12/8) and outperformed the market by an even larger margin.

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