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Did Hedge Funds Drop The Ball On Spark Energy, Inc. (SPKE) ?

Abigail Fisher

Is Spark Energy, Inc. (NASDAQ:SPKE) a good equity to bet on right now? We like to check what the smart money thinks first before doing extensive research. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It's not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.

Is Spark Energy, Inc. (NASDAQ:SPKE) the right investment to pursue these days? Hedge funds are in a pessimistic mood. The number of long hedge fund positions shrunk by 1 in recent months. Our calculations also showed that SPKE isn't among the 30 most popular stocks among hedge funds.

If you'd ask most investors, hedge funds are perceived as underperforming, old financial vehicles of yesteryear. While there are more than 8000 funds trading at the moment, We choose to focus on the crème de la crème of this group, about 750 funds. These hedge fund managers administer bulk of all hedge funds' total asset base, and by monitoring their first-class equity investments, Insider Monkey has brought to light numerous investment strategies that have historically outperformed Mr. Market. Insider Monkey's flagship hedge fund strategy surpassed the S&P 500 index by around 5 percentage points per annum since its inception in May 2014 through June 18th. We were able to generate large returns even by identifying short candidates. Our portfolio of short stocks lost 28.2% since February 2017 (through June 18th) even though the market was up nearly 30% during the same period. We just shared a list of 5 short targets in our latest quarterly update and they are already down an average of 8.2% in a month whereas our long picks outperformed the market by 2.5 percentage points in this volatile 5 week period (our long picks also beat the market by 15 percentage points so far this year).

Roger Ibbotson Zebra Capital

We're going to view the fresh hedge fund action surrounding Spark Energy, Inc. (NASDAQ:SPKE).

How have hedgies been trading Spark Energy, Inc. (NASDAQ:SPKE)?

At the end of the first quarter, a total of 11 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -8% from the previous quarter. On the other hand, there were a total of 7 hedge funds with a bullish position in SPKE a year ago. With hedge funds' capital changing hands, there exists an "upper tier" of key hedge fund managers who were boosting their stakes substantially (or already accumulated large positions).

SPKE_june2019

Among these funds, Blackstart Capital held the most valuable stake in Spark Energy, Inc. (NASDAQ:SPKE), which was worth $6.9 million at the end of the first quarter. On the second spot was Millennium Management which amassed $5.1 million worth of shares. Moreover, Marshall Wace LLP, Renaissance Technologies, and D E Shaw were also bullish on Spark Energy, Inc. (NASDAQ:SPKE), allocating a large percentage of their portfolios to this stock.

Due to the fact that Spark Energy, Inc. (NASDAQ:SPKE) has witnessed bearish sentiment from the entirety of the hedge funds we track, it's safe to say that there were a few fund managers that decided to sell off their positions entirely last quarter. Intriguingly, Adam Usdan's Trellus Management Company sold off the largest stake of the "upper crust" of funds watched by Insider Monkey, worth close to $0.2 million in stock. Peter Muller's fund, PDT Partners, also cut its stock, about $0.1 million worth. These moves are interesting, as total hedge fund interest was cut by 1 funds last quarter.

Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as Spark Energy, Inc. (NASDAQ:SPKE) but similarly valued. We will take a look at Genco Shipping & Trading Limited (NYSE:GNK), Bel Fuse, Inc. (NASDAQ:BELFB), Source Capital, Inc. (NYSE:SOR), and Weyco Group, Inc. (NASDAQ:WEYS). This group of stocks' market values are similar to SPKE's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position GNK,12,171868,0 BELFB,8,23311,-1 SOR,2,6340,0 WEYS,3,20426,0 Average,6.25,55486,-0.25 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 6.25 hedge funds with bullish positions and the average amount invested in these stocks was $55 million. That figure was $16 million in SPKE's case. Genco Shipping & Trading Limited (NYSE:GNK) is the most popular stock in this table. On the other hand Source Capital, Inc. (NYSE:SOR) is the least popular one with only 2 bullish hedge fund positions. Spark Energy, Inc. (NASDAQ:SPKE) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 20 most popular stocks among hedge funds returned 6.2% in Q2 through June 19th and outperformed the S&P 500 ETF (SPY) by nearly 3 percentage points. Hedge funds were also right about betting on SPKE as the stock returned 27.6% during the same period 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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