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Did Hedge Funds Drop The Ball On Pegasystems Inc. (PEGA) ?

The Insider Monkey team has completed processing the quarterly 13F filings for the December quarter submitted by the hedge funds and other money managers included in our extensive database. Most hedge fund investors endured a torrid quarter, which certainly propelled them to adjust their equity holdings so as to maintain the desired risk profile. As a result, the relevancy of these public filings and their content is indisputable, as they may reveal numerous high-potential stocks. The following article will discuss the smart money sentiment towards Pegasystems Inc. (NASDAQ:PEGA).

Pegasystems Inc. (NASDAQ:PEGA) was in 19 hedge funds’ portfolios at the end of the fourth quarter of 2018. PEGA has experienced a decrease in hedge fund sentiment recently. There were 22 hedge funds in our database with PEGA positions at the end of the previous quarter. Our calculations also showed that PEGA isn’t among the 30 most popular stocks among hedge funds.

If you’d ask most traders, hedge funds are perceived as unimportant, old financial tools of years past. While there are greater than 8000 funds with their doors open at present, Our researchers look at the leaders of this club, around 750 funds. These investment experts have their hands on the lion’s share of all hedge funds’ total capital, and by shadowing their top investments, Insider Monkey has brought to light a few investment strategies that have historically outrun the market. Insider Monkey’s flagship hedge fund strategy surpassed the S&P 500 index by nearly 5 percentage points a year since its inception in May 2014 through early November 2018. We were able to generate large returns even by identifying short candidates. Our portfolio of short stocks lost 27.5% since February 2017 (through March 12th) even though the market was up nearly 25% during the same period. We just shared a list of 6 short targets in our latest quarterly update and they are already down an average of 6% in less than a month.

Daniel Sundheim D1 Capital

Daniel Sundheim of D1 Capital

Let’s take a look at the key hedge fund action surrounding Pegasystems Inc. (NASDAQ:PEGA).

What have hedge funds been doing with Pegasystems Inc. (NASDAQ:PEGA)?

At the end of the fourth quarter, a total of 19 of the hedge funds tracked by Insider Monkey were long this stock, a change of -14% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards PEGA over the last 14 quarters. With hedge funds’ sentiment swirling, there exists a few notable hedge fund managers who were adding to their holdings considerably (or already accumulated large positions).

PEGA_apr2019

According to Insider Monkey’s hedge fund database, Amish Mehta’s SQN Investors has the number one position in Pegasystems Inc. (NASDAQ:PEGA), worth close to $101.3 million, accounting for 11.7% of its total 13F portfolio. Sitting at the No. 2 spot is Christian Leone of Luxor Capital Group, with a $92.5 million position; 3.4% of its 13F portfolio is allocated to the company. Other members of the smart money with similar optimism contain Daniel Sundheim’s D1 Capital Partners, Eric Bannasch’s Cadian Capital and Ken Fisher’s Fisher Asset Management.

Judging by the fact that Pegasystems Inc. (NASDAQ:PEGA) has experienced a decline in interest from the entirety of the hedge funds we track, logic holds that there were a few hedge funds that slashed their full holdings last quarter. At the top of the heap, Ricky Sandler’s Eminence Capital dumped the biggest investment of the “upper crust” of funds tracked by Insider Monkey, worth about $96.6 million in stock. Manoneet Singh’s fund, Kavi Asset Management, also dropped its stock, about $7.9 million worth. These transactions are important to note, as total hedge fund interest fell by 3 funds last quarter.

Let’s now review hedge fund activity in other stocks similar to Pegasystems Inc. (NASDAQ:PEGA). These stocks are Spire Inc. (NYSE:SR), Methanex Corporation (NASDAQ:MEOH), Wintrust Financial Corporation (NASDAQ:WTFC), and Carter’s, Inc. (NYSE:CRI). This group of stocks’ market valuations are closest to PEGA’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
SR 13 90505 -2
MEOH 21 263929 0
WTFC 24 373072 0
CRI 22 275897 -4
Average 20 250851 -1.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 20 hedge funds with bullish positions and the average amount invested in these stocks was $251 million. That figure was $528 million in PEGA’s case. Wintrust Financial Corporation (NASDAQ:WTFC) is the most popular stock in this table. On the other hand Spire Inc. (NYSE:SR) is the least popular one with only 13 bullish hedge fund positions. Pegasystems Inc. (NASDAQ:PEGA) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. A small number of hedge funds were also right about betting on PEGA as the stock returned 50.4% and outperformed the market by an even larger margin.

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

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