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Did Hedge Funds Drop The Ball On Perficient, Inc. (PRFT) ?

We know that hedge funds generate strong, risk-adjusted returns over the long run, which is why imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, professional investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do. However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, let’s examine the smart money sentiment towards Perficient, Inc. (NASDAQ:PRFT) and determine whether hedge funds skillfully traded this stock.

Is Perficient, Inc. (NASDAQ:PRFT) the right pick for your portfolio? The smart money was getting less bullish. The number of bullish hedge fund bets dropped by 2 recently. Our calculations also showed that PRFT 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.

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 was 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Dmitry Balyasny of Balyasny Asset Managemnet

Dmitry Balyasny of Balyasny Asset Management

At Insider Monkey we scour multiple sources to uncover the next great investment idea. Cannabis stocks are roaring back in 2020, so we are checking out this under-the-radar stock. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. 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. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. Now let’s take a look at the key hedge fund action encompassing Perficient, Inc. (NASDAQ:PRFT).

What have hedge funds been doing with Perficient, Inc. (NASDAQ:PRFT)?

Heading into the second quarter of 2020, a total of 21 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -9% from one quarter earlier. By comparison, 16 hedge funds held shares or bullish call options in PRFT a year ago. With the smart money’s sentiment swirling, there exists an “upper tier” of notable hedge fund managers who were upping their stakes substantially (or already accumulated large positions).

Is PRFT A Good Stock To Buy?

Among these funds, Driehaus Capital held the most valuable stake in Perficient, Inc. (NASDAQ:PRFT), which was worth $16.5 million at the end of the third quarter. On the second spot was GLG Partners which amassed $9.2 million worth of shares. Intrinsic Edge Capital, Citadel Investment Group, and McKinley Capital Management 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 Manatuck Hill Partners allocated the biggest weight to Perficient, Inc. (NASDAQ:PRFT), around 1.61% of its 13F portfolio. Intrinsic Edge Capital is also relatively very bullish on the stock, dishing out 0.85 percent of its 13F equity portfolio to PRFT.

Because Perficient, Inc. (NASDAQ:PRFT) has witnessed falling interest from hedge fund managers, it’s easy to see that there were a few fund managers who were dropping their full holdings heading into Q4. At the top of the heap, Ken Grossman and Glen Schneider’s SG Capital Management dropped the largest position of all the hedgies followed by Insider Monkey, valued at close to $9.2 million in stock. Minhua Zhang’s fund, Weld Capital Management, also dropped its stock, about $1.2 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest was cut by 2 funds heading into Q4.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Perficient, Inc. (NASDAQ:PRFT) but similarly valued. These stocks are Sandstorm Gold Ltd. (NYSE:SAND), BGC Partners, Inc. (NASDAQ:BGCP), Beam Therapeutics Inc. (NASDAQ:BEAM), and Opko Health Inc. (NYSE:OPK). This group of stocks’ market values are closest to PRFT’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
SAND 13 64388 0
BGCP 31 142549 4
BEAM 11 157065 11
OPK 13 9526 -3
Average 17 93382 3

View table here if you experience formatting issues.

As you can see these stocks had an average of 17 hedge funds with bullish positions and the average amount invested in these stocks was $93 million. That figure was $59 million in PRFT’s case. BGC Partners, Inc. (NASDAQ:BGCP) is the most popular stock in this table. On the other hand Beam Therapeutics Inc. (NASDAQ:BEAM) is the least popular one with only 11 bullish hedge fund positions. Perficient, Inc. (NASDAQ:PRFT) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 18.6% in 2020 through July 27th but still beat the market by 17.1 percentage points. Hedge funds were also right about betting on PRFT as the stock returned 36.2% since Q1 and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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