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Were Hedge Funds Right About Flocking Into Insperity Inc (NSP) ?

Like everyone else, elite investors make mistakes. Some of their top consensus picks, such as Amazon, Facebook and Alibaba, have not done well in Q4 due to various reasons. Nevertheless, the data show elite investors’ consensus picks have done well on average over the long-term. The top 15 S&P 500 stocks among hedge funds at the end of September 2018 returned an average of 1% through March 15th whereas the S&P 500 Index ETF lost 2.2% during the same period. Because their consensus picks have done well, we pay attention to what elite funds think before doing extensive research on a stock. In this article, we take a closer look at Insperity Inc (NYSE:NSP) from the perspective of those elite funds.

Is Insperity Inc (NYSE:NSP) a splendid investment today? The smart money is in an optimistic mood. The number of long hedge fund positions increased by 8 recently. Our calculations also showed that NSP isn’t among the 30 most popular stocks among hedge funds. NSP was in 24 hedge funds’ portfolios at the end of the fourth quarter of 2018. There were 16 hedge funds in our database with NSP positions at the end of the previous quarter.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 32 percentage points since May 2014 through March 12, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 27.5% through March 12, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

David Harding

Let’s view the recent hedge fund action surrounding Insperity Inc (NYSE:NSP).

Hedge fund activity in Insperity Inc (NYSE:NSP)

At the end of the fourth quarter, a total of 24 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 50% from the previous quarter. By comparison, 19 hedge funds held shares or bullish call options in NSP a year ago. With hedgies’ positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were upping their holdings considerably (or already accumulated large positions).

NSP_apr2019

The largest stake in Insperity Inc (NYSE:NSP) was held by Renaissance Technologies, which reported holding $59.5 million worth of stock at the end of September. It was followed by AQR Capital Management with a $34.1 million position. Other investors bullish on the company included GLG Partners, Winton Capital Management, and D E Shaw.

As one would reasonably expect, key money managers have jumped into Insperity Inc (NYSE:NSP) headfirst. Stevens Capital Management, managed by Matthew Tewksbury, established the most valuable position in Insperity Inc (NYSE:NSP). Stevens Capital Management had $0.9 million invested in the company at the end of the quarter. Benjamin A. Smith’s Laurion Capital Management also initiated a $0.5 million position during the quarter. The other funds with brand new NSP positions are David Andre and Astro Teller’s Cerebellum Capital, Joel Greenblatt’s Gotham Asset Management, and Paul Tudor Jones’s Tudor Investment Corp.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Insperity Inc (NYSE:NSP) but similarly valued. These stocks are Flowers Foods, Inc. (NYSE:FLO), Grupo Financiero Galicia S.A. (NASDAQ:GGAL), EnLink Midstream Partners LP (NYSE:ENLK), and Pure Storage, Inc. (NYSE:PSTG). All of these stocks’ market caps match NSP’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
FLO 20 196727 0
GGAL 19 133358 4
ENLK 6 18606 2
PSTG 26 454069 -5
Average 17.75 200690 0.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 17.75 hedge funds with bullish positions and the average amount invested in these stocks was $201 million. That figure was $263 million in NSP’s case. Pure Storage, Inc. (NYSE:PSTG) is the most popular stock in this table. On the other hand EnLink Midstream Partners LP (NYSE:ENLK) is the least popular one with only 6 bullish hedge fund positions. Insperity Inc (NYSE:NSP) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. Hedge funds were also right about betting on NSP as the stock returned 31.1% and outperformed the market by an even larger margin. Hedge funds were rewarded for their relative bullishness.

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

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