Legendary investors such as Jeffrey Talpins and Seth Klarman earn enormous amounts of money for themselves and their investors by doing in-depth research on small-cap stocks that big brokerage houses don't publish. Small cap stocks -especially when they are screened well- can generate substantial outperformance versus a boring index fund. That's why we analyze the activity of those elite funds in these small-cap stocks. In the following paragraphs, we analyze SpartanNash Company (NASDAQ:SPTN) from the perspective of those elite funds.
SpartanNash Company (NASDAQ:SPTN) investors should be aware of an increase in activity from the world's largest hedge funds lately. SPTN was in 16 hedge funds' portfolios at the end of the fourth quarter of 2018. There were 14 hedge funds in our database with SPTN positions at the end of the previous quarter. Our calculations also showed that SPTN isn't among the 30 most popular stocks among hedge funds.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 market by 32 percentage points since May 2014 through March 12, 2019 (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. Even if you aren't comfortable with shorting stocks, you should at least avoid initiating long positions in our short portfolio.
Let's take a look at the new hedge fund action encompassing SpartanNash Company (NASDAQ:SPTN).
How have hedgies been trading SpartanNash Company (NASDAQ:SPTN)?
At Q4's end, a total of 16 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 14% from one quarter earlier. On the other hand, there were a total of 13 hedge funds with a bullish position in SPTN 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.
The largest stake in SpartanNash Company (NASDAQ:SPTN) was held by Private Capital Management, which reported holding $23 million worth of stock at the end of December. It was followed by Millennium Management with a $4.3 million position. Other investors bullish on the company included AQR Capital Management, Arrowstreet Capital, and Citadel Investment Group.
As industrywide interest jumped, specific money managers were leading the bulls' herd. AQR Capital Management, managed by Cliff Asness, assembled the biggest position in SpartanNash Company (NASDAQ:SPTN). AQR Capital Management had $2.5 million invested in the company at the end of the quarter. Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital also initiated a $2.1 million position during the quarter. The following funds were also among the new SPTN investors: Jeffrey Talpins's Element Capital Management, Minhua Zhang's Weld Capital Management, and Matthew Hulsizer's PEAK6 Capital Management.
Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as SpartanNash Company (NASDAQ:SPTN) but similarly valued. We will take a look at Lindblad Expeditions Holdings Inc (NASDAQ:LIND), IRSA Propiedades Comerciales S.A. (NASDAQ:IRCP), Coherus Biosciences Inc (NASDAQ:CHRS), and Central Securities Corporation (NYSE:CET). This group of stocks' market values resemble SPTN's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position LIND,14,108364,0 IRCP,5,11395,2 CHRS,20,106981,-3 CET,2,14038,-1 Average,10.25,60195,-0.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 10.25 hedge funds with bullish positions and the average amount invested in these stocks was $60 million. That figure was $39 million in SPTN's case. Coherus Biosciences Inc (NASDAQ:CHRS) is the most popular stock in this table. On the other hand Central Securities Corporation (NYSE:CET) is the least popular one with only 2 bullish hedge fund positions. SpartanNash Company (NASDAQ:SPTN) 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 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. Unfortunately SPTN wasn't nearly as popular as these 15 stock and hedge funds that were betting on SPTN were disappointed as the stock returned -4.9% and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 15 most popular stocks) among hedge funds as 13 of these stocks already outperformed the market this year.
Disclosure: None. This article was originally published at Insider Monkey.