Did Hedge Funds Make The Right Call On Pluralsight, Inc. (PS)?

Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the first quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 4.5 years and analyze what the smart money thinks of Pluralsight, Inc. (NASDAQ:PS) based on that data and determine whether they were really smart about the stock.

Pluralsight, Inc. (NASDAQ:PS) shares haven’t seen a lot of action during the first quarter. Overall, hedge fund sentiment was unchanged. The stock was in 18 hedge funds’ portfolios at the end of the first quarter of 2020. At the end of this article we will also compare PS to other stocks including Prospect Capital Corporation (NASDAQ:PSEC), Epizyme Inc (NASDAQ:EPZM), and Badger Meter, Inc. (NYSE:BMI) to get a better sense of its popularity.

Video: Watch our video about the top 5 most popular hedge fund stocks.

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 101% since March 2017 and outperformed the S&P 500 ETFs by more than 58 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a 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 America 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. Keeping this in mind let’s view the latest hedge fund action regarding Pluralsight, Inc. (NASDAQ:PS).

Hedge fund activity in Pluralsight, Inc. (NASDAQ:PS)

At Q1’s end, a total of 18 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the fourth quarter of 2019. Below, you can check out the change in hedge fund sentiment towards PS over the last 18 quarters. With hedge funds’ positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were upping their stakes significantly (or already accumulated large positions).

Is PS A Good Stock To Buy?

More specifically, D E Shaw was the largest shareholder of Pluralsight, Inc. (NASDAQ:PS), with a stake worth $13.6 million reported as of the end of September. Trailing D E Shaw was Akaris Global Partners, which amassed a stake valued at $12.7 million. Tensile Capital, Citadel Investment Group, and Whetstone Capital Advisors 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 North Run Capital allocated the biggest weight to Pluralsight, Inc. (NASDAQ:PS), around 6.66% of its 13F portfolio. Akaris Global Partners is also relatively very bullish on the stock, earmarking 6.2 percent of its 13F equity portfolio to PS.

Seeing as Pluralsight, Inc. (NASDAQ:PS) has experienced falling interest from hedge fund managers, we can see that there were a few funds that decided to sell off their full holdings in the first quarter. Intriguingly, Nancy Zevenbergen’s Zevenbergen Capital Investments dumped the largest stake of all the hedgies watched by Insider Monkey, totaling close to $21.2 million in stock. Christopher Lyle’s fund, SCGE Management, also cut its stock, about $14.1 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s now take a look at hedge fund activity in other stocks similar to Pluralsight, Inc. (NASDAQ:PS). These stocks are Prospect Capital Corporation (NASDAQ:PSEC), Epizyme Inc (NASDAQ:EPZM), Badger Meter, Inc. (NYSE:BMI), and Hub Group Inc (NASDAQ:HUBG). This group of stocks’ market valuations are similar to PS’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
PSEC 8 16564 -7
EPZM 22 351530 4
BMI 20 125239 0
HUBG 17 190642 -2
Average 16.75 170994 -1.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 16.75 hedge funds with bullish positions and the average amount invested in these stocks was $171 million. That figure was $78 million in PS’s case. Epizyme Inc (NASDAQ:EPZM) is the most popular stock in this table. On the other hand Prospect Capital Corporation (NASDAQ:PSEC) is the least popular one with only 8 bullish hedge fund positions. Pluralsight, Inc. (NASDAQ:PS) 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 PS as the stock returned 77.1% 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.