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Were Hedge Funds Right About SPX Corporation (SPXC)?

Coronavirus is probably the #1 concern in investors’ minds right now. It should be. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW. We predicted that a US recession is imminent and US stocks will go down by at least 20% in the next 3-6 months. We also told you to short the market ETFs and buy long-term bonds. Investors who agreed with us and replicated these trades are up double digits whereas the market is down double digits. Our article also called for a total international travel ban to prevent the spread of the coronavirus especially from Europe. We were one step ahead of the markets and the president (see why hell is coming).

In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. Is SPX Corporation (NYSE:SPXC) a good place to invest some of your money right now? We can gain invaluable insight to help us answer that question by studying the investment trends of top investors, who employ world-class Ivy League graduates, who are given immense resources and industry contacts to put their financial expertise to work. The top picks of these firms have historically outperformed the market when we account for known risk factors, making them very valuable investment ideas.

SPX Corporation (NYSE:SPXC) shares haven’t seen a lot of action during the fourth quarter. Overall, hedge fund sentiment was unchanged. The stock was in 19 hedge funds’ portfolios at the end of December. 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 Northwest Natural Holding Company (NYSE:NWN), Epizyme Inc (NASDAQ:EPZM), and Hertz Global Holdings, Inc. (NYSE:HTZ) to gather more data points. Our calculations also showed that SPXC isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).

At the moment there are numerous metrics stock traders can use to appraise their holdings. A pair of the less utilized metrics are hedge fund and insider trading activity. Our researchers have shown that, historically, those who follow the top picks of the best investment managers can beat the broader indices by a healthy amount (see the details here).

Jay Petschek - Corsair Capital

Jay Petschek of Corsair Capital Management

Now we’re going to take a look at the fresh hedge fund action encompassing SPX Corporation (NYSE:SPXC).

How have hedgies been trading SPX Corporation (NYSE:SPXC)?

At Q4’s end, a total of 19 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards SPXC over the last 18 quarters. With hedge funds’ sentiment swirling, there exists an “upper tier” of notable hedge fund managers who were adding to their holdings significantly (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, Selz Capital, managed by Bernard Selz, holds the number one position in SPX Corporation (NYSE:SPXC). Selz Capital has a $36.5 million position in the stock, comprising 6.4% of its 13F portfolio. Coming in second is Corsair Capital Management, led by Jay Petschek and Steven Major, holding a $21.2 million position; 6.4% of its 13F portfolio is allocated to the stock. Other professional money managers that hold long positions include Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, Frederick DiSanto’s Ancora Advisors and Ken Griffin’s Citadel Investment Group. In terms of the portfolio weights assigned to each position Selz Capital allocated the biggest weight to SPX Corporation (NYSE:SPXC), around 6.4% of its 13F portfolio. Corsair Capital Management is also relatively very bullish on the stock, dishing out 6.35 percent of its 13F equity portfolio to SPXC.

Judging by the fact that SPX Corporation (NYSE:SPXC) has faced bearish sentiment from the aggregate hedge fund industry, we can see that there exists a select few funds who sold off their entire stakes in the third quarter. Intriguingly, Brandon Haley’s Holocene Advisors sold off the biggest position of the 750 funds followed by Insider Monkey, valued at close to $1 million in stock. Michael Gelband’s fund, ExodusPoint Capital, also cut its stock, about $0.4 million worth. These bearish behaviors are important to note, as total hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s now take a look at hedge fund activity in other stocks similar to SPX Corporation (NYSE:SPXC). We will take a look at Northwest Natural Holding Company (NYSE:NWN), Epizyme Inc (NASDAQ:EPZM), Hertz Global Holdings, Inc. (NYSE:HTZ), and Shake Shack Inc (NYSE:SHAK). All of these stocks’ market caps match SPXC’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
NWN 17 97409 -1
EPZM 18 610687 1
HTZ 33 1387542 7
SHAK 25 343253 -4
Average 23.25 609723 0.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 23.25 hedge funds with bullish positions and the average amount invested in these stocks was $610 million. That figure was $122 million in SPXC’s case. Hertz Global Holdings, Inc. (NYSE:HTZ) is the most popular stock in this table. On the other hand Northwest Natural Holding Company (NYSE:NWN) is the least popular one with only 17 bullish hedge fund positions. SPX Corporation (NYSE:SPXC) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. 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 10.1 percentage points. These stocks lost 13.0% in 2020 through April 6th but beat the market by 4.2 percentage points. Unfortunately SPXC wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); SPXC investors were disappointed as the stock returned -38% during the same time 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 most of these stocks already outperformed the market in 2020.
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

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

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