At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (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. In this article, we will take a closer look at hedge fund sentiment towards SP Plus Corp (NASDAQ:SP) at the end of the first quarter and determine whether the smart money was really smart about this stock.
SP Plus Corp (NASDAQ:SP) was in 11 hedge funds' portfolios at the end of the first quarter of 2020. SP investors should be aware of a decrease in support from the world's most elite money managers of late. There were 13 hedge funds in our database with SP positions at the end of the previous quarter. Our calculations also showed that SP isn't among the 30 most popular stocks among hedge funds (click for Q1 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.
To the average investor there are many formulas investors put to use to assess stocks. Some of the less utilized formulas are hedge fund and insider trading moves. Our experts have shown that, historically, those who follow the best picks of the best hedge fund managers can outpace the broader indices by a solid amount (see the details here).
[caption id="attachment_26092" align="aligncenter" width="400"] Joel Greenblatt of Gotham Asset Management[/caption]
At Insider Monkey we scour multiple sources to uncover the next great investment idea. There is a lot of volatility in the markets and this presents amazing investment opportunities from time to time. For example, this trader claims to deliver juiced up returns with one trade a week, so we are checking out his highest conviction idea. A second trader claims to score lucrative profits by utilizing a "weekend trading strategy", so we look into his strategy's picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We recently recommended several stocks partly inspired by legendary Bill Miller's investor letter. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. Now let's review the fresh hedge fund action regarding SP Plus Corp (NASDAQ:SP).
What does smart money think about SP Plus Corp (NASDAQ:SP)?
Heading into the second quarter of 2020, a total of 11 of the hedge funds tracked by Insider Monkey were long this stock, a change of -15% from the fourth quarter of 2019. By comparison, 14 hedge funds held shares or bullish call options in SP a year ago. With hedge funds' sentiment swirling, there exists a few noteworthy hedge fund managers who were boosting their stakes meaningfully (or already accumulated large positions).
Among these funds, P2 Capital Partners held the most valuable stake in SP Plus Corp (NASDAQ:SP), which was worth $33.1 million at the end of the third quarter. On the second spot was Renaissance Technologies which amassed $13.2 million worth of shares. Millennium Management, Intrepid Capital Management, and AQR Capital Management were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position P2 Capital Partners allocated the biggest weight to SP Plus Corp (NASDAQ:SP), around 3.96% of its 13F portfolio. Intrepid Capital Management is also relatively very bullish on the stock, setting aside 2.99 percent of its 13F equity portfolio to SP.
Judging by the fact that SP Plus Corp (NASDAQ:SP) has experienced falling interest from the entirety of the hedge funds we track, it's easy to see that there was a specific group of funds who sold off their full holdings by the end of the first quarter. Interestingly, Paul Marshall and Ian Wace's Marshall Wace LLP cut the largest stake of the 750 funds followed by Insider Monkey, worth about $0.6 million in stock, and Joel Greenblatt's Gotham Asset Management was right behind this move, as the fund sold off about $0.6 million worth. These transactions are interesting, as total hedge fund interest was cut by 2 funds by the end of the first quarter.
Let's now review hedge fund activity in other stocks - not necessarily in the same industry as SP Plus Corp (NASDAQ:SP) but similarly valued. We will take a look at Camden National Corporation (NASDAQ:CAC), Mercer International Inc. (NASDAQ:MERC), Origin Bancorp, Inc. (NASDAQ:OBNK), and Dine Brands Global, Inc. (NYSE:DIN). This group of stocks' market values are similar to SP's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CAC,10,43580,-3 MERC,10,84956,-4 OBNK,5,10774,-3 DIN,21,71501,1 Average,11.5,52703,-2.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 11.5 hedge funds with bullish positions and the average amount invested in these stocks was $53 million. That figure was $65 million in SP's case. Dine Brands Global, Inc. (NYSE:DIN) is the most popular stock in this table. On the other hand Origin Bancorp, Inc. (NASDAQ:OBNK) is the least popular one with only 5 bullish hedge fund positions. SP Plus Corp (NASDAQ:SP) 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 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 12.3% in 2020 through June 30th and surpassed the market by 15.5 percentage points. Unfortunately SP wasn't nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); SP investors were disappointed as the stock returned -0.2% during the second quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
Disclosure: None. This article was originally published at Insider Monkey.