Out of thousands of stocks that are currently traded on the market, it is difficult to identify those that will really generate strong returns. Hedge funds and institutional investors spend millions of dollars on analysts with MBAs and PhDs, who are industry experts and well connected to other industry and media insiders on top of that. Individual investors can piggyback the hedge funds employing these talents and can benefit from their vast resources and knowledge in that way. We analyze quarterly 13F filings of nearly 817 hedge funds and, by looking at the smart money sentiment that surrounds a stock, we can determine whether it has the potential to beat the market over the long-term. Therefore, let’s take a closer look at what smart money thinks about Spire Inc. (NYSE:SR).
Spire Inc. (NYSE:SR) was in 20 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistic is 18. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. SR has experienced an increase in hedge fund sentiment recently. There were 18 hedge funds in our database with SR holdings at the end of June. Our calculations also showed that SR 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).
Video: Watch our video about the top 5 most popular hedge fund stocks.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 113% since March 2017 and outperformed the S&P 500 ETFs by more than 66 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Stuart Zimmer of Zimmer 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 take a look at the new hedge fund action regarding Spire Inc. (NYSE:SR).
Do Hedge Funds Think SR Is A Good Stock To Buy Now?
At third quarter’s end, a total of 20 of the hedge funds tracked by Insider Monkey were long this stock, a change of 11% from the second quarter of 2020. Below, you can check out the change in hedge fund sentiment towards SR over the last 21 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Spire Inc. (NYSE:SR) was held by Zimmer Partners, which reported holding $9.8 million worth of stock at the end of September. It was followed by Renaissance Technologies with a $8.4 million position. Other investors bullish on the company included D E Shaw, Marshall Wace LLP, and Citadel Investment Group. In terms of the portfolio weights assigned to each position Weld Capital Management allocated the biggest weight to Spire Inc. (NYSE:SR), around 0.19% of its 13F portfolio. Quantamental Technologies is also relatively very bullish on the stock, setting aside 0.16 percent of its 13F equity portfolio to SR.
With a general bullishness amongst the heavyweights, key hedge funds were leading the bulls’ herd. Zimmer Partners, managed by Stuart J. Zimmer, assembled the largest position in Spire Inc. (NYSE:SR). Zimmer Partners had $9.8 million invested in the company at the end of the quarter. John Overdeck and David Siegel’s Two Sigma Advisors also made a $1.1 million investment in the stock during the quarter. The following funds were also among the new SR investors: Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, Minhua Zhang’s Weld Capital Management, and Mika Toikka’s AlphaCrest Capital Management.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Spire Inc. (NYSE:SR) but similarly valued. These stocks are SPS Commerce, Inc. (NASDAQ:SPSC), Box, Inc. (NYSE:BOX), Franklin Electric Co., Inc. (NASDAQ:FELE), Cracker Barrel Old Country Store, Inc. (NASDAQ:CBRL), Capri Holdings Limited (NYSE:CPRI), Alarm.com Holdings Inc (NASDAQ:ALRM), and Amkor Technology, Inc. (NASDAQ:AMKR). This group of stocks’ market valuations are closest to SR’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| SPSC | 14 | 148023 | -5 |
| BOX | 41 | 582012 | 8 |
| FELE | 19 | 229763 | 4 |
| CBRL | 29 | 216139 | 7 |
| CPRI | 36 | 426536 | 8 |
| ALRM | 24 | 215299 | 0 |
| AMKR | 27 | 98077 | 4 |
| Average | 27.1 | 273693 | 3.7 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 27.1 hedge funds with bullish positions and the average amount invested in these stocks was $274 million. That figure was $48 million in SR’s case. Box, Inc. (NYSE:BOX) is the most popular stock in this table. On the other hand SPS Commerce, Inc. (NASDAQ:SPSC) is the least popular one with only 14 bullish hedge fund positions. Spire Inc. (NYSE:SR) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for SR is 48.1. 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 30.7% in 2020 through December 14th and still beat the market by 15.8 percentage points. A small number of hedge funds were also right about betting on SR as the stock returned 24.5% since the end of the third quarter (through 12/14) and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.
