Did Hedge Funds Make The Right Call On Progress Software Corporation (PRGS) ?

The latest 13F reporting period has come and gone, and 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. Now, 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 you are going to find out whether hedge funds thoughtProgress Software Corporation (NASDAQ:PRGS) was a good investment heading into the second quarter and how the stock traded in comparison to the top hedge fund picks.

Is Progress Software Corporation (NASDAQ:PRGS) a buy here? The smart money was taking an optimistic view. The number of bullish hedge fund positions improved by 2 recently. Our calculations also showed that PRGS 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). PRGS was in 22 hedge funds’ portfolios at the end of the first quarter of 2020. There were 20 hedge funds in our database with PRGS holdings at the end of the previous quarter.

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.

Kevin Oram Praesidium Investment Management

Kevin Oram of Praesidium Investment Management Company

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, on one site we found out that NBA champion Isiah Thomas is now the CEO of this cannabis company. The same site also talks about a snack manufacturer that’s growing at 30% annually. 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. Hedge fund sentiment towards Tesla reached its all time high at the end of 2019 and Tesla shares more than tripled this year. We are trying to identify other EV revolution winners, so if you have any good ideas send us an email. Keeping this in mind let’s take a look at the key hedge fund action regarding Progress Software Corporation (NASDAQ:PRGS).

What have hedge funds been doing with Progress Software Corporation (NASDAQ:PRGS)?

At the end of the first quarter, a total of 22 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 10% from the fourth quarter of 2019. The graph below displays the number of hedge funds with bullish position in PRGS over the last 18 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Of the funds tracked by Insider Monkey, Renaissance Technologies has the biggest position in Progress Software Corporation (NASDAQ:PRGS), worth close to $76.8 million, accounting for 0.1% of its total 13F portfolio. Coming in second is Praesidium Investment Management Company, led by Kevin Oram and Peter Uddo, holding a $28 million position; 2.3% of its 13F portfolio is allocated to the company. Some other professional money managers that hold long positions encompass Noam Gottesman’s GLG Partners, Ken Fisher’s Fisher Asset Management and D. E. Shaw’s D E Shaw. In terms of the portfolio weights assigned to each position Praesidium Investment Management Company allocated the biggest weight to Progress Software Corporation (NASDAQ:PRGS), around 2.26% of its 13F portfolio. Invenomic Capital Management is also relatively very bullish on the stock, dishing out 0.43 percent of its 13F equity portfolio to PRGS.

With a general bullishness amongst the heavyweights, some big names have been driving this bullishness. Praesidium Investment Management Company, managed by Kevin Oram and Peter Uddo, established the most valuable position in Progress Software Corporation (NASDAQ:PRGS). Praesidium Investment Management Company had $28 million invested in the company at the end of the quarter. Greg Eisner’s Engineers Gate Manager also made a $0.6 million investment in the stock during the quarter. The other funds with new positions in the stock are Ali Motamed’s Invenomic Capital Management, Paul Marshall and Ian Wace’s Marshall Wace LLP, and Benjamin A. Smith’s Laurion Capital Management.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Progress Software Corporation (NASDAQ:PRGS) but similarly valued. We will take a look at STAAR Surgical Company (NASDAQ:STAA), Primo Water Corporation (NYSE:PRMW), Pebblebrook Hotel Trust (NYSE:PEB), and Hillenbrand, Inc. (NYSE:HI). This group of stocks’ market caps resemble PRGS’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
STAA 21 519115 -2
PRMW 36 463146 23
PEB 10 224467 -12
HI 14 124446 -10
Average 20.25 332794 -0.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 20.25 hedge funds with bullish positions and the average amount invested in these stocks was $333 million. That figure was $198 million in PRGS’s case. Primo Water Corporation (NYSE:PRMW) is the most popular stock in this table. On the other hand Pebblebrook Hotel Trust (NYSE:PEB) is the least popular one with only 10 bullish hedge fund positions. Progress Software Corporation (NASDAQ:PRGS) 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 12.3% in 2020 through June 30th but still beat the market by 15.5 percentage points. Hedge funds were also right about betting on PRGS, though not to the same extent, as the stock returned 21.6% during the second quarter and outperformed the market as well.

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