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Is SPWH Stock A Buy or Sell?

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·6 min read
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Our extensive research has shown that imitating the smart money can generate significant returns for retail investors, which is why we track nearly 900 active prominent money managers and analyze their quarterly 13F filings. The stocks that are heavily bought by hedge funds historically outperformed the market, though there is no shortage of high profile failures like hedge funds' 2018 losses in Facebook and Apple. Let’s take a closer look at what the funds we track think about Sportsman's Warehouse Holdings Inc (NASDAQ:SPWH) in this article.

Is SPWH stock a buy? Money managers were reducing their bets on the stock. The number of long hedge fund bets decreased by 1 lately. Sportsman's Warehouse Holdings Inc (NASDAQ:SPWH) was in 25 hedge funds' portfolios at the end of the fourth quarter of 2020. The all time high for this statistic is 33. Our calculations also showed that SPWH isn't among the 30 most popular stocks among hedge funds (click for Q4 rankings).

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 S&P 500 ETFs by 124 percentage points since March 2017 (see the details here).

Alex Litowitz Magnetar Capital
Alex Litowitz Magnetar Capital

Alex Litowitz of Magnetar Capital

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, auto parts business is a recession resistant business, so we are taking a closer look at this discount auto parts stock that is growing at a 196% annualized rate. We go through lists like the 15 best micro-cap stocks to buy now to identify the next stock with 10x upside potential. 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. Keeping this in mind we're going to view the fresh hedge fund action regarding Sportsman's Warehouse Holdings Inc (NASDAQ:SPWH).

Do Hedge Funds Think SPWH Is A Good Stock To Buy Now?

Heading into the first quarter of 2021, a total of 25 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -4% from the third quarter of 2020. Below, you can check out the change in hedge fund sentiment towards SPWH over the last 22 quarters. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, Magnetar Capital held the most valuable stake in Sportsman's Warehouse Holdings Inc (NASDAQ:SPWH), which was worth $47.2 million at the end of the fourth quarter. On the second spot was Millennium Management which amassed $17.6 million worth of shares. Greenhouse Funds, Two Sigma Advisors, and Water Island Capital 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 Greenhouse Funds allocated the biggest weight to Sportsman's Warehouse Holdings Inc (NASDAQ:SPWH), around 1.39% of its 13F portfolio. BCK Capital is also relatively very bullish on the stock, earmarking 1.01 percent of its 13F equity portfolio to SPWH.

Due to the fact that Sportsman's Warehouse Holdings Inc (NASDAQ:SPWH) has experienced bearish sentiment from the aggregate hedge fund industry, it's safe to say that there were a few fund managers that slashed their positions entirely heading into Q1. At the top of the heap, J. Carlo Cannell's Cannell Capital sold off the largest investment of the "upper crust" of funds followed by Insider Monkey, worth an estimated $15 million in stock, and Richard Driehaus's Driehaus Capital was right behind this move, as the fund dropped about $14 million worth. These bearish behaviors are important to note, as total hedge fund interest dropped by 1 funds heading into Q1.

Let's now review hedge fund activity in other stocks similar to Sportsman's Warehouse Holdings Inc (NASDAQ:SPWH). These stocks are Energy Recovery, Inc. (NASDAQ:ERII), Blucora Inc (NASDAQ:BCOR), Cars.com Inc. (NYSE:CARS), Genesis Energy, L.P. (NYSE:GEL), SFL Corporation Ltd. (NYSE:SFL), OraSure Technologies, Inc. (NASDAQ:OSUR), and A10 Networks Inc (NYSE:ATEN). This group of stocks' market valuations are similar to SPWH's market valuation.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position ERII,11,94250,0 BCOR,16,119588,-2 CARS,19,147218,-3 GEL,4,6834,1 SFL,14,31864,4 OSUR,15,96468,-4 ATEN,22,160115,-4 Average,14.4,93762,-1.1 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 14.4 hedge funds with bullish positions and the average amount invested in these stocks was $94 million. That figure was $175 million in SPWH's case. A10 Networks Inc (NYSE:ATEN) is the most popular stock in this table. On the other hand Genesis Energy, L.P. (NYSE:GEL) is the least popular one with only 4 bullish hedge fund positions. Compared to these stocks Sportsman's Warehouse Holdings Inc (NASDAQ:SPWH) is more popular among hedge funds. Our overall hedge fund sentiment score for SPWH is 76.7. 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 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks gained 12.3% in 2021 through April 19th and still beat the market by 0.9 percentage points. Unfortunately SPWH wasn't nearly as popular as these 30 stocks and hedge funds that were betting on SPWH were disappointed as the stock returned 0.1% since the end of the fourth quarter (through 4/19) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 30 most popular stocks among hedge funds as most of these stocks already outperformed the market since 2019.

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

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