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Were Hedge Funds Right About Dumping Sportsman’s Warehouse Holdings Inc (SPWH)?

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Before we spend countless hours researching a company, we like to analyze what insiders, hedge funds and billionaire investors think of the stock first. This is a necessary first step in our investment process because our research has shown that the elite investors' consensus returns have been exceptional. In the following paragraphs, we find out what the billionaire investors and hedge funds think of Sportsman's Warehouse Holdings Inc (NASDAQ:SPWH).

Sportsman's Warehouse Holdings Inc (NASDAQ:SPWH) was in 18 hedge funds' portfolios at the end of the first quarter of 2021. The all time high for this statistic is 33. SPWH has experienced a decrease in hedge fund sentiment lately. There were 25 hedge funds in our database with SPWH positions at the end of the fourth quarter. Our calculations also showed that SPWH isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings).

In the financial world there are several formulas investors have at their disposal to appraise stocks. A pair of the most underrated formulas are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the top money managers can outclass the market by a healthy amount (see the details here). Also, our monthly newsletter's portfolio of long stock picks returned 206.8% since March 2017 (through May 2021) and beat the S&P 500 Index by more than 115 percentage points. You can download a sample issue of this newsletter on our website .

Matthew Halbower Pentwater Capital
Matthew Halbower Pentwater Capital

Matthew Halbower of Pentwater Capital

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, pet market is growing at a 7% annual rate and is expected to reach $110 billion in 2021. So, we are checking out the 5 best stocks for animal lovers. We go through lists like the 15 best Jim Cramer stocks to identify the next Tesla that will deliver outsized returns. 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 homepage. Now let's view the key hedge fund action regarding Sportsman's Warehouse Holdings Inc (NASDAQ:SPWH).

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

At the end of the first quarter, a total of 18 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -28% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards SPWH over the last 23 quarters. With hedge funds' positions undergoing their usual ebb and flow, there exists an "upper tier" of noteworthy hedge fund managers who were upping their stakes meaningfully (or already accumulated large positions).

Is SPWH A Good Stock To Buy?
Is SPWH A Good Stock To Buy?

According to Insider Monkey's hedge fund database, Magnetar Capital, managed by Alec Litowitz and Ross Laser, holds the most valuable position in Sportsman's Warehouse Holdings Inc (NASDAQ:SPWH). Magnetar Capital has a $57.6 million position in the stock, comprising 0.6% of its 13F portfolio. The second most bullish fund manager is Alpine Associates, led by Robert Emil Zoellner, holding a $34.6 million position; 0.9% of its 13F portfolio is allocated to the company. Remaining members of the smart money that hold long positions include Matthew Halbower's Pentwater Capital Management, Paul Marshall and Ian Wace's Marshall Wace LLP and Israel Englander's Millennium Management. In terms of the portfolio weights assigned to each position Havens Advisors allocated the biggest weight to Sportsman's Warehouse Holdings Inc (NASDAQ:SPWH), around 2.52% of its 13F portfolio. Alpine Associates is also relatively very bullish on the stock, setting aside 0.94 percent of its 13F equity portfolio to SPWH.

Seeing as Sportsman's Warehouse Holdings Inc (NASDAQ:SPWH) has witnessed bearish sentiment from hedge fund managers, it's safe to say that there lies a certain "tier" of money managers that slashed their positions entirely last quarter. Intriguingly, Joe Milano's Greenhouse Funds said goodbye to the largest stake of all the hedgies monitored by Insider Monkey, comprising an estimated $14.9 million in stock. John Orrico's fund, Water Island Capital, also dropped its stock, about $12.3 million worth. These transactions are interesting, as total hedge fund interest was cut by 7 funds last quarter.

Let's check out hedge fund activity in other stocks - not necessarily in the same industry as Sportsman's Warehouse Holdings Inc (NASDAQ:SPWH) but similarly valued. We will take a look at Solar Capital Ltd. (NASDAQ:SLRC), Compugen Ltd. (NASDAQ:CGEN), Gannett Co., Inc. (NYSE:GCI), Vinci Partners Investments Ltd. (NASDAQ:VINP), MRC Global Inc (NYSE:MRC), QCR Holdings, Inc. (NASDAQ:QCRH), and Magic Software Enterprises Ltd. (NASDAQ:MGIC). 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 SLRC,9,20926,-3 CGEN,11,152055,0 GCI,21,84764,6 VINP,13,79275,13 MRC,15,64342,-3 QCRH,13,74904,0 MGIC,5,17899,0 Average,12.4,70595,1.9 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 12.4 hedge funds with bullish positions and the average amount invested in these stocks was $71 million. That figure was $212 million in SPWH's case. Gannett Co., Inc. (NYSE:GCI) is the most popular stock in this table. On the other hand Magic Software Enterprises Ltd. (NASDAQ:MGIC) is the least popular one with only 5 bullish hedge fund positions. Sportsman's Warehouse Holdings Inc (NASDAQ:SPWH) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for SPWH is 55. 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. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 28.5% in 2021 through July 23rd and beat the market again by 10.1 percentage points. Unfortunately SPWH wasn't nearly as popular as these 5 stocks and hedge funds that were betting on SPWH were disappointed as the stock returned 4.1% since the end of March (through 7/23) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.

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