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Hedge Funds Have Never Been Less Bullish On Steel Partners Holdings LP (SPLP)?

Debasis Saha

We at Insider Monkey have gone over 821 13F filings that hedge funds and prominent investors are required to file by the SEC The 13F filings show the funds' and investors' portfolio positions as of March 31st, near the height of the coronavirus market crash. In this article, we look at what those funds think of Steel Partners Holdings LP (NYSE:SPLP) based on that data.

Is Steel Partners Holdings LP (NYSE:SPLP) a superb investment today? The best stock pickers are selling. The number of long hedge fund positions decreased by 1 lately. Our calculations also showed that SPLP 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.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 44 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 36% through May 18th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

[caption id="attachment_530601" align="aligncenter" width="400"] Warren Lichtenstein of Steel Partners[/caption]

Warren Lichtenstein Steel Partners

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, legendary investor Bill Miller told investors to sell 7 extremely popular recession stocks last month. So, we went through his list and recommended another stock with 100% upside potential instead. We interview hedge fund managers and ask them about their best ideas. You can watch our latest hedge fund manager interview here and find out the name of the large-cap healthcare stock that Sio Capital's Michael Castor expects to double. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind let's take a gander at the key hedge fund action encompassing Steel Partners Holdings LP (NYSE:SPLP).

How have hedgies been trading Steel Partners Holdings LP (NYSE:SPLP)?

Heading into the second quarter of 2020, a total of 3 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -25% from one quarter earlier. On the other hand, there were a total of 6 hedge funds with a bullish position in SPLP a year ago. So, let's find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is SPLP A Good Stock To Buy?

The largest stake in Steel Partners Holdings LP (NYSE:SPLP) was held by Steel Partners, which reported holding $10.8 million worth of stock at the end of September. It was followed by GAMCO Investors with a $0.2 million position. The only other hedge fund that is bullish on the company was MFP Investors.

We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Fondren Management. One hedge fund selling its entire position doesn't always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don't think this is the case in this case because none of the 750+ hedge funds tracked by Insider Monkey identified SPLP as a viable investment and initiated a position in the stock.

Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as Steel Partners Holdings LP (NYSE:SPLP) but similarly valued. These stocks are Synchronoss Technologies, Inc. (NASDAQ:SNCR), Aeglea BioTherapeutics, Inc. (NASDAQ:AGLE), Select Bancorp, Inc. (NASDAQ:SLCT), and Liquidia Technologies, Inc. (NASDAQ:LQDA). This group of stocks' market values resemble SPLP's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position SNCR,8,8880,0 AGLE,13,54859,1 SLCT,6,8927,1 LQDA,6,14895,-1 Average,8.25,21890,0.25 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 8.25 hedge funds with bullish positions and the average amount invested in these stocks was $22 million. That figure was $11 million in SPLP's case. Aeglea BioTherapeutics, Inc. (NASDAQ:AGLE) is the most popular stock in this table. On the other hand Select Bancorp, Inc. (NASDAQ:SLCT) is the least popular one with only 6 bullish hedge fund positions. Compared to these stocks Steel Partners Holdings LP (NYSE:SPLP) is even less popular than SLCT. Hedge funds dodged a bullet by taking a bearish stance towards SPLP. Our calculations showed that the top 10 most popular hedge fund stocks returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 7.9% in 2020 through May 22nd but managed to beat the market by 15.6 percentage points. Unfortunately SPLP wasn't nearly as popular as these 10 stocks (hedge fund sentiment was very bearish); SPLP investors were disappointed as the stock returned -17.7% during the second quarter (through May 22nd) 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 so far in 2020.

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

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