Did Hedge Funds Make The Right Call On PTC Inc (PTC) ?

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 PTC Inc (NASDAQ:PTC) and determine whether hedge funds skillfully traded this stock.

PTC Inc (NASDAQ:PTC) shares haven’t seen a lot of action during the first quarter. Overall, hedge fund sentiment was unchanged. The stock was in 35 hedge funds’ portfolios at the end of March. At the end of this article we will also compare PTC to other stocks including Algonquin Power & Utilities Corp. (NYSE:AQN), Lennox International Inc. (NYSE:LII), and Arconic Corporation (NYSE:ARNC) to get a better sense of its popularity.

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

To most traders, hedge funds are assumed to be unimportant, old financial tools of yesteryear. While there are over 8000 funds trading at the moment, We look at the elite of this group, around 850 funds. These hedge fund managers administer the lion’s share of the smart money’s total capital, and by keeping track of their matchless stock picks, Insider Monkey has determined various investment strategies that have historically beaten the market. Insider Monkey’s flagship short hedge fund strategy outperformed the S&P 500 short ETFs by around 20 percentage points per year since its inception in March 2017. Our portfolio of short stocks lost 36% since February 2017 (through May 18th) even though the market was up 30% during the same period. We just shared a list of 8 short targets in our latest quarterly update .

David Winters

At Insider Monkey we scour multiple sources to uncover the next great investment idea. There is a lot of volatility in the markets and this presents amazing investment opportunities from time to time. For example, this trader claims to deliver juiced up returns with one trade a week, so we are checking out his highest conviction idea. A second trader claims to score lucrative profits by utilizing a “weekend trading strategy”, so we look into his strategy’s picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We recently recommended several stocks partly inspired by legendary Bill Miller’s investor letter. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind we’re going to take a gander at the fresh hedge fund action regarding PTC Inc (NASDAQ:PTC).

What does smart money think about PTC Inc (NASDAQ:PTC)?

Heading into the second quarter of 2020, a total of 35 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from one quarter earlier. On the other hand, there were a total of 25 hedge funds with a bullish position in PTC a year ago. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is PTC A Good Stock To Buy?

Of the funds tracked by Insider Monkey, David S. Winter and David J. Millstone’s 40 North Management has the largest position in PTC Inc (NASDAQ:PTC), worth close to $250.5 million, amounting to 15.2% of its total 13F portfolio. The second most bullish fund manager is Select Equity Group, led by Robert Joseph Caruso, holding a $189.9 million position; 1.3% of its 13F portfolio is allocated to the company. Other professional money managers that hold long positions include Kevin Oram and Peter Uddo’s Praesidium Investment Management Company, Ian Simm’s Impax Asset Management and Michael Lowenstein’s Kensico Capital. In terms of the portfolio weights assigned to each position StackLine Partners allocated the biggest weight to PTC Inc (NASDAQ:PTC), around 17.07% of its 13F portfolio. 40 North Management is also relatively very bullish on the stock, designating 15.25 percent of its 13F equity portfolio to PTC.

Because PTC Inc (NASDAQ:PTC) has witnessed bearish sentiment from the smart money, logic holds that there was a specific group of funds who were dropping their positions entirely by the end of the first quarter. Interestingly, David Goel and Paul Ferri’s Matrix Capital Management sold off the largest stake of the “upper crust” of funds followed by Insider Monkey, valued at about $43.6 million in stock, and Renaissance Technologies was right behind this move, as the fund said goodbye to about $25.2 million worth. These moves are interesting, as aggregate 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 PTC Inc (NASDAQ:PTC). These stocks are Algonquin Power & Utilities Corp. (NYSE:AQN), Lennox International Inc. (NYSE:LII), Arconic Corporation (NYSE:ARNC), and Carlisle Companies, Inc. (NYSE:CSL). All of these stocks’ market caps resemble PTC’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
AQN 14 253831 1
LII 21 169377 -11
ARNC 25 1740220 -18
CSL 23 262658 -3
Average 20.75 606522 -7.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 20.75 hedge funds with bullish positions and the average amount invested in these stocks was $607 million. That figure was $1182 million in PTC’s case. Arconic Corporation (NYSE:ARNC) is the most popular stock in this table. On the other hand Algonquin Power & Utilities Corp. (NYSE:AQN) is the least popular one with only 14 bullish hedge fund positions. Compared to these stocks PTC Inc (NASDAQ:PTC) is more popular among hedge funds. 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 returned 12.3% in 2020 through June 30th but still managed to beat the market by 15.5 percentage points. Hedge funds were also right about betting on PTC as the stock returned 27.1% in Q2 and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.

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