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Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds' and successful investors' positions as of the end of the second quarter. You can find articles about an individual hedge fund's trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 5 years and analyze what the smart money thinks of SPS Commerce, Inc. (NASDAQ:SPSC) based on that data and determine whether they were really smart about the stock.
Is SPS Commerce, Inc. (NASDAQ:SPSC) a bargain? Prominent investors were betting on the stock. The number of long hedge fund bets moved up by 3 lately. SPS Commerce, Inc. (NASDAQ:SPSC) was in 19 hedge funds' portfolios at the end of the second quarter of 2020. The all time high for this statistics is 24. Our calculations also showed that SPSC isn't among the 30 most popular stocks among hedge funds (click for Q2 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 today’s marketplace there are tons of metrics market participants have at their disposal to appraise publicly traded companies. A couple of the less utilized metrics are hedge fund and insider trading activity. We have shown that, historically, those who follow the top picks of the elite investment managers can outclass the broader indices by a healthy amount (see the details here).
Lee Ainslie of Maverick Capital
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 are checking out this junior gold mining stock and we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 10 most profitable companies in the world 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 to get excerpts of these letters in your inbox. With all of this in mind we're going to take a glance at the recent hedge fund action regarding SPS Commerce, Inc. (NASDAQ:SPSC).
How have hedgies been trading SPS Commerce, Inc. (NASDAQ:SPSC)?
At Q2's end, a total of 19 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 19% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards SPSC over the last 20 quarters. With hedge funds' capital changing hands, there exists a few key hedge fund managers who were upping their holdings considerably (or already accumulated large positions).
The largest stake in SPS Commerce, Inc. (NASDAQ:SPSC) was held by Renaissance Technologies, which reported holding $72.7 million worth of stock at the end of September. It was followed by Arrowstreet Capital with a $26.4 million position. Other investors bullish on the company included GLG Partners, D E Shaw, and Two Sigma Advisors. In terms of the portfolio weights assigned to each position Quantamental Technologies allocated the biggest weight to SPS Commerce, Inc. (NASDAQ:SPSC), around 0.19% of its 13F portfolio. Prescott Group Capital Management is also relatively very bullish on the stock, designating 0.19 percent of its 13F equity portfolio to SPSC.
As aggregate interest increased, specific money managers were breaking ground themselves. Winton Capital Management, managed by David Harding, initiated the most valuable position in SPS Commerce, Inc. (NASDAQ:SPSC). Winton Capital Management had $2.2 million invested in the company at the end of the quarter. Parvinder Thiara's Athanor Capital also made a $1.2 million investment in the stock during the quarter. The following funds were also among the new SPSC investors: Dmitry Balyasny's Balyasny Asset Management, Michael Gelband's ExodusPoint Capital, and Lee Ainslie's Maverick Capital.
Let's now review hedge fund activity in other stocks similar to SPS Commerce, Inc. (NASDAQ:SPSC). We will take a look at Mimecast Limited (NASDAQ:MIME), Brighthouse Financial, Inc. (NASDAQ:BHF), Diodes Incorporated (NASDAQ:DIOD), Manchester United PLC (NYSE:MANU), Green Dot Corporation (NYSE:GDOT), Advanced Energy Industries, Inc. (NASDAQ:AEIS), and Acushnet Holdings Corp. (NYSE:GOLF). This group of stocks' market valuations match SPSC's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position MIME,34,256708,-5 BHF,34,332550,9 DIOD,14,78957,1 MANU,11,35251,3 GDOT,23,700625,1 AEIS,21,81139,7 GOLF,11,31850,-1 Average,21.1,216726,2.1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 21.1 hedge funds with bullish positions and the average amount invested in these stocks was $217 million. That figure was $172 million in SPSC's case. Mimecast Limited (NASDAQ:MIME) is the most popular stock in this table. On the other hand Manchester United PLC (NYSE:MANU) is the least popular one with only 11 bullish hedge fund positions. SPS Commerce, Inc. (NASDAQ:SPSC) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for SPSC is 49.1. 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. 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 24.8% in 2020 through the end of September and surpassed the market by 19.3 percentage points. Unfortunately SPSC wasn't nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); SPSC investors were disappointed as the stock returned 3.7% in the third 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.
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Disclosure: None. This article was originally published at Insider Monkey.