The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 821 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds' and investors' portfolio positions as of March 31st, a week after the market trough. We are almost done with the second quarter. Investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned almost 20% this quarter. In this article we look at how hedge funds traded Spire Inc. (NYSE:SR) and determine whether the smart money was really smart about this stock.
Spire Inc. (NYSE:SR) was in 13 hedge funds' portfolios at the end of March. SR shareholders have witnessed an increase in enthusiasm from smart money lately. There were 12 hedge funds in our database with SR positions at the end of the previous quarter. Our calculations also showed that SR isn't among the 30 most popular stocks among hedge funds (click for Q1 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 58 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.
[caption id="attachment_26340" align="aligncenter" width="392"] Ken Griffin of Citadel Investment Group[/caption]
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, we take a look at lists like the 10 most profitable companies in the world to identify emerging companies that are likely to deliver 1000% gains in the coming years. We interview hedge fund managers and ask them about their best ideas. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. For example we are checking out stocks recommended/scorned by legendary Bill Miller. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind let's take a gander at the latest hedge fund action regarding Spire Inc. (NYSE:SR).
What does smart money think about Spire Inc. (NYSE:SR)?
At the end of the first quarter, a total of 13 of the hedge funds tracked by Insider Monkey were long this stock, a change of 8% from the previous quarter. By comparison, 15 hedge funds held shares or bullish call options in SR a year ago. With hedgies' capital changing hands, there exists a select group of notable hedge fund managers who were adding to their holdings significantly (or already accumulated large positions).
Among these funds, Renaissance Technologies held the most valuable stake in Spire Inc. (NYSE:SR), which was worth $32.6 million at the end of the third quarter. On the second spot was D E Shaw which amassed $2 million worth of shares. AQR Capital Management, Citadel Investment Group, and ExodusPoint 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 Quantinno Capital allocated the biggest weight to Spire Inc. (NYSE:SR), around 0.14% of its 13F portfolio. ExodusPoint Capital is also relatively very bullish on the stock, earmarking 0.06 percent of its 13F equity portfolio to SR.
Now, some big names were breaking ground themselves. D E Shaw, managed by D. E. Shaw, initiated the biggest position in Spire Inc. (NYSE:SR). D E Shaw had $2 million invested in the company at the end of the quarter. Michael Gelband's ExodusPoint Capital also made a $1.1 million investment in the stock during the quarter. The other funds with new positions in the stock are Dmitry Balyasny's Balyasny Asset Management, Paul Tudor Jones's Tudor Investment Corp, and Israel Englander's Millennium Management.
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Spire Inc. (NYSE:SR) but similarly valued. We will take a look at National Oilwell Varco, Inc. (NYSE:NOV), AppFolio Inc (NASDAQ:APPF), Iovance Biotherapeutics, Inc. (NASDAQ:IOVA), and Integra Lifesciences Holdings Corp (NASDAQ:IART). This group of stocks' market valuations are similar to SR's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position NOV,29,476345,-2 APPF,19,272296,3 IOVA,39,1344741,7 IART,22,106793,5 Average,27.25,550044,3.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 27.25 hedge funds with bullish positions and the average amount invested in these stocks was $550 million. That figure was $40 million in SR's case. Iovance Biotherapeutics, Inc. (NASDAQ:IOVA) is the most popular stock in this table. On the other hand AppFolio Inc (NASDAQ:APPF) is the least popular one with only 19 bullish hedge fund positions. Compared to these stocks Spire Inc. (NYSE:SR) is even less popular than APPF. Hedge funds dodged a bullet by taking a bearish stance towards SR. Our calculations showed that the top 10 most popular hedge fund stocks returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 13.3% in 2020 through June 25th but managed to beat the market by 16.8 percentage points. Unfortunately SR wasn't nearly as popular as these 10 stocks (hedge fund sentiment was very bearish); SR investors were disappointed as the stock returned -13.4% during the second quarter (through June 25th) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market so far in 2020.
Disclosure: None. This article was originally published at Insider Monkey.