Is Pool Corporation (POOL) A Good Stock To Buy?

Billionaire hedge fund managers such as Steve Cohen and Stan Druckenmiller can generate millions or even billions of dollars every year by pinning down high-potential small-cap stocks and pouring cash into these candidates. Small-cap stocks are overlooked by most investors, brokerage houses, and financial services hubs, while the unlimited research abilities of the big players within the hedge fund industry can easily identify the undervalued and high-potential stocks that reside the ignored corners of equity markets. There are numerous small-cap stocks that have turned out to be great winners, which is one of the main reasons the Insider Monkey team pays close attention to the hedge fund activity in relation to these stocks.

Is Pool Corporation (NASDAQ:POOL) a safe investment now? Prominent investors are actually taking an optimistic view. The number of long hedge fund positions inched up by 3 lately. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Cullen/Frost Bankers, Inc. (NYSE:CFR), Navient Corp (NASDAQ:NAVI), and Neurocrine Biosciences, Inc. (NASDAQ:NBIX) to gather more data points.

At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.

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With all of this in mind, let’s take a peek at the key action encompassing Pool Corporation (NASDAQ:POOL).

How are hedge funds trading Pool Corporation (NASDAQ:POOL)?

At Q3’s end, a total of 26 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 13% from the second quarter of 2016. This is also the highest level achieved by the company over the last 5 quarters.

According to Insider Monkey’s hedge fund database, Ken Fisher’s Fisher Asset Management has the largest position in Pool Corporation (NASDAQ:POOL), worth close to $61.7 million, corresponding to 0.1% of its total 13F portfolio. Sitting at the No. 2 spot is Chuck Royce of Royce & Associates, with a $33.7 million position; the fund has 0.2% of its 13F portfolio invested in the stock. Some other peers that hold long positions comprise Ben Gambill’s Tiger Eye Capital, Israel Englander’s Millennium Management and Ian Simm’s Impax Asset Management. We should note that Impax Asset Management is one of the 100 best performing hedge funds in our database.

Now, key money managers were breaking ground themselves. Renaissance Technologies, founded by billionaire Jim Simons, created the most valuable position in Pool Corporation (NASDAQ:POOL). Renaissance Technologies had $14 million invested in the company at the end of the quarter. John Overdeck and David Siegel’s quant hedge fund Two Sigma Advisors also made a $2.6 million investment in the stock during the quarter. The following funds were also among the new POOL investors: Mike Vranos’ Ellington, Matthew Tewksbury’s Stevens Capital Management, and Joel Greenblatt’s Gotham Asset Management.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Pool Corporation (NASDAQ:POOL) but similarly valued. These stocks are Cullen/Frost Bankers, Inc. (NYSE:CFR), Navient Corp (NASDAQ:NAVI), Neurocrine Biosciences, Inc. (NASDAQ:NBIX), and USG Corporation (NYSE:USG). This group of stocks’ market valuations are similar to POOL’s market valuation.

As you can see these stocks had an average of 27 hedge funds with bullish positions and the average amount invested in these stocks was $614 million. That figure was $205 million in POOL’s case. Neurocrine Biosciences, Inc. (NASDAQ:NBIX) is the most popular stock in this table. On the other hand Cullen/Frost Bankers, Inc. (NYSE:CFR) is the least popular one with only 13 bullish hedge fund positions. Pool Corporation (NASDAQ:POOL) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard NBIX might be a better candidate to consider taking a long position in.