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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 third 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 4 years and analyze what the smart money thinks of Spark Networks Inc (NYSE:LOV) based on that data.
Is Spark Networks Inc (NYSE:LOV) going to take off soon? Hedge funds are becoming hopeful. The number of long hedge fund bets rose by 3 lately. Our calculations also showed that LOV isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). LOV was in 6 hedge funds' portfolios at the end of September. There were 3 hedge funds in our database with LOV positions at the end of the previous quarter.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Hedge funds' reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn't keep up with the unhedged returns of the market indices. Our research has shown that hedge funds' small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
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Matthew Hulsizer of PEAK6 Capital[/caption]
We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. One of the most bullish analysts in America just put his money where his mouth is. He says, "I'm investing more today than I did back in early 2009." So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We even check out this option genius' weekly trade ideas. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager's investor letter and the stock already gained 20 percent. Now we're going to take a gander at the latest hedge fund action surrounding Spark Networks Inc (NYSE:LOV).
Hedge fund activity in Spark Networks Inc (NYSE:LOV)
Heading into the fourth quarter of 2019, a total of 6 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 100% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards LOV over the last 17 quarters. With the smart money's positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were adding to their holdings meaningfully (or already accumulated large positions).
More specifically, Osmium Partners was the largest shareholder of Spark Networks Inc (NYSE:LOV), with a stake worth $7.8 million reported as of the end of September. Trailing Osmium Partners was PEAK6 Capital Management, which amassed a stake valued at $2.8 million. Engine Capital, Yacktman Asset Management, and Renaissance Technologies 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 Osmium Partners allocated the biggest weight to Spark Networks Inc (NYSE:LOV), around 9.77% of its 13F portfolio. Engine Capital is also relatively very bullish on the stock, setting aside 1.26 percent of its 13F equity portfolio to LOV.
Now, key hedge funds have jumped into Spark Networks Inc (NYSE:LOV) headfirst. Engine Capital, managed by Arnaud Ajdler, created the biggest position in Spark Networks Inc (NYSE:LOV). Engine Capital had $2.7 million invested in the company at the end of the quarter. Donald Yacktman's Yacktman Asset Management also initiated a $1.2 million position during the quarter. The only other fund with a brand new LOV position is Dan Sobol and Lisa Hess's SkyTop Capital Management.
Let's also examine hedge fund activity in other stocks similar to Spark Networks Inc (NYSE:LOV). We will take a look at Computer Task Group, Inc. (NASDAQ:CTG), CLPS Incorporation (NASDAQ:CLPS), Nicholas Financial, Inc. (NASDAQ:NICK), and IEC Electronics Corp. (NYSE:IEC). All of these stocks' market caps resemble LOV's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CTG,7,13528,-2 CLPS,2,1260,1 NICK,2,22051,0 IEC,3,6238,1 Average,3.5,10769,0 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 3.5 hedge funds with bullish positions and the average amount invested in these stocks was $11 million. That figure was $15 million in LOV's case. Computer Task Group, Inc. (NASDAQ:CTG) is the most popular stock in this table. On the other hand CLPS Incorporation (NASDAQ:CLPS) is the least popular one with only 2 bullish hedge fund positions. Spark Networks Inc (NYSE:LOV) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we'd rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately LOV wasn't nearly as popular as these 20 stocks and hedge funds that were betting on LOV were disappointed as the stock returned -2% during the fourth quarter (through the end of November) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
Disclosure: None. This article was originally published at Insider Monkey.