Is XpresSpa Group, Inc. (XSPA) A Good Stock To Buy?

Many prominent investors, including Warren Buffett, David Tepper and Stan Druckenmiller, have been cautious regarding the current bull market and missed out as the stock market reached another high in recent weeks. On the other hand, technology hedge funds weren’t timid and registered double digit market beating gains. Financials, energy and industrial stocks aren’t doing great but many of the stocks that delivered strong returns since March are still going very strong and hedge funds actually increased their positions in these stocks. In this article we will find out how hedge fund sentiment to XpresSpa Group, Inc. (NASDAQ:XSPA) changed recently.

Hedge fund interest in XpresSpa Group, Inc. (NASDAQ:XSPA) shares was flat at the end of last quarter. This is usually a negative indicator. Our calculations also showed that XSPA 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). At the end of this article we will also compare XSPA to other stocks including PFSweb, Inc. (NASDAQ:PFSW), EDAP TMS S.A. (NASDAQ:EDAP), and PCB Bancorp (NASDAQ:PCB) to get a better sense of its popularity.

Video: Watch our video about the top 5 most popular hedge fund stocks.

So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 more than 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. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.

Michael Gelband of ExodusPoint Capital

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 10 most profitable companies in the world 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. With all of this in mind let’s view the new hedge fund action surrounding XpresSpa Group, Inc. (NASDAQ:XSPA).

What have hedge funds been doing with XpresSpa Group, Inc. (NASDAQ:XSPA)?

Heading into the fourth quarter of 2020, a total of 3 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from the second quarter of 2020. The graph below displays the number of hedge funds with bullish position in XSPA over the last 21 quarters. So, let’s review 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, Hal Mintz’s Sabby Capital has the largest position in XpresSpa Group, Inc. (NASDAQ:XSPA), worth close to $2.3 million, amounting to 0.4% of its total 13F portfolio. Sitting at the No. 2 spot is Citadel Investment Group, managed by Ken Griffin, which holds a $0.1 million call position; less than 0.1%% of its 13F portfolio is allocated to the company. Some other professional money managers with similar optimism contain Ken Griffin’s Citadel Investment Group and Michael Gelband’s ExodusPoint Capital. In terms of the portfolio weights assigned to each position Sabby Capital allocated the biggest weight to XpresSpa Group, Inc. (NASDAQ:XSPA), around 0.35% of its 13F portfolio. ExodusPoint Capital is also relatively very bullish on the stock, earmarking 0.0008 percent of its 13F equity portfolio to XSPA.

Since XpresSpa Group, Inc. (NASDAQ:XSPA) has witnessed declining sentiment from the entirety of the hedge funds we track, we can see that there were a few hedgies that elected to cut their positions entirely in the third quarter. It’s worth mentioning that Israel Englander’s Millennium Management sold off the biggest position of all the hedgies followed by Insider Monkey, valued at close to $0.7 million in stock. Donald Sussman’s fund, Paloma Partners, also said goodbye to its stock, about $0.4 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s go over hedge fund activity in other stocks similar to XpresSpa Group, Inc. (NASDAQ:XSPA). These stocks are PFSweb, Inc. (NASDAQ:PFSW), EDAP TMS S.A. (NASDAQ:EDAP), PCB Bancorp (NASDAQ:PCB), ESSA Bancorp, Inc. (NASDAQ:ESSA), FVCBankcorp, Inc. (NASDAQ:FVCB), Leaf Group Ltd (NYSE:LEAF), and Contura Energy, Inc. (NYSE:CTRA). All of these stocks’ market caps resemble XSPA’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
PFSW 8 15762 1
EDAP 3 9159 0
PCB 4 14857 0
ESSA 3 8857 1
FVCB 3 3495 -1
LEAF 10 26521 -1
CTRA 18 46876 -1
Average 7 17932 -0.1

View table here if you experience formatting issues.

As you can see these stocks had an average of 7 hedge funds with bullish positions and the average amount invested in these stocks was $18 million. That figure was $3 million in XSPA’s case. Contura Energy, Inc. (NYSE:CTRA) is the most popular stock in this table. On the other hand EDAP TMS S.A. (NASDAQ:EDAP) is the least popular one with only 3 bullish hedge fund positions. Compared to these stocks XpresSpa Group, Inc. (NASDAQ:XSPA) is even less popular than EDAP. Our overall hedge fund sentiment score for XSPA is 23. 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. Hedge funds dodged a bullet by taking a bearish stance towards XSPA. Our calculations showed that the top 20 most popular hedge fund stocks returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 28.1% in 2020 through November 23rd but managed to beat the market again by 15.4 percentage points. Unfortunately XSPA wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); XSPA investors were disappointed as the stock returned -12.7% since the end of the third quarter (through 11/23) 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 most of these stocks already outperformed the market so far in 2020.

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