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 second 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 5 years and analyze what the smart money thinks of PPD, Inc. (NASDAQ:PPD) based on that data and determine whether they were really smart about the stock.
PPD, Inc. (NASDAQ:PPD) shares haven’t seen a lot of action during the second quarter. Overall, hedge fund sentiment was unchanged. The stock was in 27 hedge funds’ portfolios at the end of June. Our calculations also showed that PPD isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings and see the video for a quick look at the top 5 stocks). At the end of this article we will also compare PPD to other stocks including Lamb Weston Holdings, Inc. (NYSE:LW), Guidewire Software Inc (NYSE:GWRE), and Brookfield Property Partners LP (NASDAQ:BPY) to get a better sense of its popularity.
Video: Watch our video about the top 5 most popular hedge fund stocks.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 56 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 34% through August 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, legal marijuana is one of the fastest growing industries right now, so we are checking out stock pitches like “the Starbucks of cannabis” to identify the next tenbagger. 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. You can subscribe to our free daily newsletter on our website to get excerpts of these letters in your inbox. Now let’s take a look at the fresh hedge fund action encompassing PPD, Inc. (NASDAQ:PPD).
How are hedge funds trading PPD, Inc. (NASDAQ:PPD)?
Heading into the third quarter of 2020, a total of 27 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from the previous quarter. The graph below displays the number of hedge funds with bullish position in PPD over the last 20 quarters. With the smart money’s sentiment swirling, there exists an “upper tier” of key hedge fund managers who were upping their stakes significantly (or already accumulated large positions).
According to Insider Monkey’s hedge fund database, Bob Peck and Andy Raab’s FPR Partners has the number one position in PPD, Inc. (NASDAQ:PPD), worth close to $200.4 million, comprising 7% of its total 13F portfolio. Sitting at the No. 2 spot is Daniel Sundheim of D1 Capital Partners, with a $77 million position; 0.6% of its 13F portfolio is allocated to the stock. Remaining members of the smart money that hold long positions include Brandon Haley’s Holocene Advisors, Jeremy Green’s Redmile Group and Philip Hilal’s Clearfield Capital. In terms of the portfolio weights assigned to each position Clearfield Capital allocated the biggest weight to PPD, Inc. (NASDAQ:PPD), around 19.53% of its 13F portfolio. FPR Partners is also relatively very bullish on the stock, earmarking 6.97 percent of its 13F equity portfolio to PPD.
Since PPD, Inc. (NASDAQ:PPD) has faced falling interest from the aggregate hedge fund industry, it’s safe to say that there is a sect of fund managers that elected to cut their entire stakes in the second quarter. Interestingly, Derek C. Schrier’s Indaba Capital Management dumped the largest stake of all the hedgies followed by Insider Monkey, totaling an estimated $18.1 million in stock. Zachary Miller’s fund, Parian Global Management, also sold off its stock, about $12.7 million worth. These bearish behaviors are interesting, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as PPD, Inc. (NASDAQ:PPD) but similarly valued. These stocks are Lamb Weston Holdings, Inc. (NYSE:LW), Guidewire Software Inc (NYSE:GWRE), Brookfield Property Partners LP (NASDAQ:BPY), Fidelity National Financial Inc (NYSE:FNF), Huntington Bancshares Incorporated (NASDAQ:HBAN), Zynga Inc (NASDAQ:ZNGA), and PulteGroup, Inc. (NYSE:PHM). This group of stocks’ market valuations are closest to PPD’s market valuation.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 33 hedge funds with bullish positions and the average amount invested in these stocks was $621 million. That figure was $620 million in PPD’s case. Zynga Inc (NASDAQ:ZNGA) is the most popular stock in this table. On the other hand Brookfield Property Partners LP (NASDAQ:BPY) is the least popular one with only 6 bullish hedge fund positions. PPD, Inc. (NASDAQ:PPD) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for PPD is 57.8. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. 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 21.3% in 2020 through September 25th and still beat the market by 17.7 percentage points. A small number of hedge funds were also right about betting on PPD as the stock returned 25.9% since the end of June (through September 25th) and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.