The third-quarter stock market correction has turned out to resemble the situation observed during the Asian financial crisis of 1997. The two relatively short-lived corrections occurred at a time with stable interest rates, falling commodity markets, with strong-performing technology and healthcare sectors, and struggling energy sector. Similarly, the two corrections followed long periods without a correction, which had to come sooner or later and it did. Even so, several prominent hedge fund investors publicly asserted their bearish view on the current state of the U.S. equity markets, suggesting that they significantly cut their exposure to equities during the latest quarter. Having said that, it would be worthwhile to take a look at the hedge fund sentiment on Staples, Inc. (NASDAQ:SPLS) in order to identify whether reputable and successful top money managers continue to believe in its potential.
Is Staples, Inc. a buy right now? Money managers are taking an optimistic view. The number of long hedge fund bets increased by 7 lately. 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 Sensata Technologies Holding N.V. (NYSE:ST), Fibria Celulose SA (ADR) (NYSE:FBR), and Mallinckrodt PLC (NYSE:MNK) to gather more data points.
According to most stock holders, hedge funds are assumed to be worthless, outdated investment vehicles of years past. While there are over 8000 funds trading at present, we hone in on the moguls of this group, around 700 funds. These money managers control most of the hedge fund industry’s total capital, and by monitoring their unrivaled stock picks, Insider Monkey has formulated a few investment strategies that have historically outstripped the broader indices. Insider Monkey’s small-cap hedge fund strategy beat the S&P 500 index by 12 percentage points per annum for a decade in their back tests.
Now, let’s take a peek at the fresh action regarding Staples, Inc. (NASDAQ:SPLS).
What does the smart money think about Staples, Inc. (NASDAQ:SPLS)?
At Q3’s end, a total of 54 of the hedge funds tracked by Insider Monkey were bullish on this stock, an increase of 15% from the previous quarter. With hedgies’ capital changing hands, there exists a few noteworthy hedge fund managers who were increasing their stakes considerably (or already accumulated large positions).
Of the funds tracked by Insider Monkey, Pzena Investment Management, managed by Richard S. Pzena, holds the biggest position in Staples, Inc. (NASDAQ:SPLS). The fund has a $299.1 million stake in the company, comprising 1.9% of its 13F portfolio. The second largest stake is held by Stelliam Investment Management, led by Ross Margolies, holding a $114.9 million position; 2.9% of its 13F portfolio is allocated to the stock. Some other members of the smart money with similar optimism consist of Cliff Asness’s AQR Capital Management, and Jeffrey Smith’s Starboard Value LP.
As aggregate interest increased, key money managers were leading the bulls’ herd. Laurion Capital Management, managed by Benjamin A. Smith, established the most valuable call position in Staples, Inc. (NASDAQ:SPLS), which carried a value of $51.4 million at the end of the quarter. Ray Dalio’s Bridgewater Associates also initiated a $9.9 million position during the quarter. The other funds with new positions in the stock are Alec Litowitz and Ross Laser’s Magnetar Capital, Gregg Moskowitz’s Interval Partners, and Paul Marshall and Ian Wace’s Marshall Wace LLP.
Let’s now review hedge fund activity in other stocks similar to Staples, Inc. (NASDAQ:SPLS). These stocks are Sensata Technologies Holding N.V. (NYSE:ST), Fibria Celulose SA (ADR) (NYSE:FBR), Mallinckrodt PLC (NYSE:MNK), and Melco Crown Entertainment Ltd (ADR) (NASDAQ:MPEL). This group of stocks’ market caps are closest to SPLS’s market cap.
|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 25 hedge funds with bullish positions and the average amount invested in these stocks was $910 million. Mallinckrodt PLC (NYSE:MNK) is the most popular stock in this table. On the other hand Fibria Celulose SA (ADR) (NYSE:FBR) is the least popular one with only 8 bullish hedge fund positions. Staples, Inc. (NASDAQ:SPLS) clearly outshines all of them, with 54 elite funds having invested as much as $1.34 billion at the end of the quarter. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.