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 Spectrum Brands Holdings, Inc. (NYSE:SPB) based on that data and determine whether they were really smart about the stock.
Is Spectrum Brands Holdings, Inc. (NYSE:SPB) a healthy stock for your portfolio? Money managers were getting more optimistic. The number of long hedge fund bets moved up by 2 lately. Spectrum Brands Holdings, Inc. (NYSE:SPB) was in 26 hedge funds' portfolios at the end of the second quarter of 2020. The all time high for this statistics is 45. Our calculations also showed that SPB 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.
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 S&P 500 ETFs by more than 56 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 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 stocks that are in our short portfolio.
David E. Shaw of D.E. Shaw
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, legal marijuana is one of the fastest growing industries right now, so we are checking out stock pitches like “the Starbucks of cannabis” to identify the next tenbagger. 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. Now we're going to take a gander at the new hedge fund action encompassing Spectrum Brands Holdings, Inc. (NYSE:SPB).
How have hedgies been trading Spectrum Brands Holdings, Inc. (NYSE:SPB)?
Heading into the third quarter of 2020, a total of 26 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 8% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards SPB over the last 20 quarters. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Pzena Investment Management held the most valuable stake in Spectrum Brands Holdings, Inc. (NYSE:SPB), which was worth $64 million at the end of the third quarter. On the second spot was AQR Capital Management which amassed $27.1 million worth of shares. Moerus Capital Management, Millennium Management, and Select Equity Group 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 AREX Capital Management allocated the biggest weight to Spectrum Brands Holdings, Inc. (NYSE:SPB), around 18.33% of its 13F portfolio. Moerus Capital Management is also relatively very bullish on the stock, dishing out 14.87 percent of its 13F equity portfolio to SPB.
With a general bullishness amongst the heavyweights, key money managers were leading the bulls' herd. Select Equity Group, managed by Robert Joseph Caruso, initiated the most outsized position in Spectrum Brands Holdings, Inc. (NYSE:SPB). Select Equity Group had $22.2 million invested in the company at the end of the quarter. Ira Unschuld's Brant Point Investment Management also made a $7.9 million investment in the stock during the quarter. The other funds with brand new SPB positions are Michael Gelband's ExodusPoint Capital, Brandon Osten's Venator Capital Management, and D. E. Shaw's D E Shaw.
Let's check out hedge fund activity in other stocks similar to Spectrum Brands Holdings, Inc. (NYSE:SPB). These stocks are Principia Biopharma Inc. (NASDAQ:PRNB), AssetMark Financial Holdings, Inc. (NYSE:AMK), Cimpress plc (NASDAQ:CMPR), Select Medical Holdings Corporation (NYSE:SEM), Yext, Inc. (NYSE:YEXT), National Storage Affiliates Trust (NYSE:NSA), and Golub Capital BDC Inc (NASDAQ:GBDC). All of these stocks' market caps match SPB's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position PRNB,26,654270,5 AMK,6,29052,2 CMPR,25,269870,6 SEM,22,93345,4 YEXT,10,31408,1 NSA,13,54586,-5 GBDC,16,42799,3 Average,16.9,167904,2.3 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 16.9 hedge funds with bullish positions and the average amount invested in these stocks was $168 million. That figure was $249 million in SPB's case. Principia Biopharma Inc. (NASDAQ:PRNB) is the most popular stock in this table. On the other hand AssetMark Financial Holdings, Inc. (NYSE:AMK) is the least popular one with only 6 bullish hedge fund positions. Spectrum Brands Holdings, Inc. (NYSE:SPB) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for SPB is 74.3. 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. 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 21.3% in 2020 through September 25th and still beat the market by 17.7 percentage points. Hedge funds were also right about betting on SPB as the stock returned 24.2% during Q3 (through September 25th) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
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Disclosure: None. This article was originally published at Insider Monkey.