We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (see why hell is coming).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. Out of thousands of stocks that are currently traded on the market, it is difficult to identify those that will really generate strong returns. Hedge funds and institutional investors spend millions of dollars on analysts with MBAs and PhDs, who are industry experts and well connected to other industry and media insiders on top of that. Individual investors can piggyback the hedge funds employing these talents and can benefit from their vast resources and knowledge in that way. We analyze quarterly 13F filings of nearly 835 hedge funds and, by looking at the smart money sentiment that surrounds a stock, we can determine whether it has the potential to beat the market over the long-term. Therefore, let’s take a closer look at what smart money thinks about Progyny, Inc. (NASDAQ:PGNY).
Progyny, Inc. (NASDAQ:PGNY) was in 8 hedge funds’ portfolios at the end of December. PGNY shareholders have witnessed an increase in hedge fund interest in recent months. There were 0 hedge funds in our database with PGNY holdings at the end of the previous quarter. Our calculations also showed that PGNY isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).
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 has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 41 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
Michael Castor of Sio Capital
We leave no stone unturned when looking for the next great investment idea. For example, we believe electric vehicles and energy storage are set to become giant markets, and we want to take advantage of the declining lithium prices amid the COVID-19 pandemic. So we are checking out investment opportunities like this one. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now we’re going to go over the new hedge fund action surrounding Progyny, Inc. (NASDAQ:PGNY).
How are hedge funds trading Progyny, Inc. (NASDAQ:PGNY)?
Heading into the first quarter of 2020, a total of 8 of the hedge funds tracked by Insider Monkey were long this stock, a change of 8 from the third quarter of 2019. Below, you can check out the change in hedge fund sentiment towards PGNY over the last 18 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Crestwood Capital Management held the most valuable stake in Progyny, Inc. (NASDAQ:PGNY), which was worth $7.9 million at the end of the third quarter. On the second spot was Citadel Investment Group which amassed $5.1 million worth of shares. Millennium Management, Sio Capital, and D E Shaw 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 Crestwood Capital Management allocated the biggest weight to Progyny, Inc. (NASDAQ:PGNY), around 3.91% of its 13F portfolio. Birchview Capital is also relatively very bullish on the stock, setting aside 0.3 percent of its 13F equity portfolio to PGNY.
Consequently, some big names have been driving this bullishness. Crestwood Capital Management, managed by Michael R. Weisberg, initiated the most valuable position in Progyny, Inc. (NASDAQ:PGNY). Crestwood Capital Management had $7.9 million invested in the company at the end of the quarter. Ken Griffin’s Citadel Investment Group also initiated a $5.1 million position during the quarter. The other funds with new positions in the stock are Israel Englander’s Millennium Management, Michael Castor’s Sio Capital, and D. E. Shaw’s D E Shaw.
Let’s check out hedge fund activity in other stocks similar to Progyny, Inc. (NASDAQ:PGNY). These stocks are Stepan Company (NYSE:SCL), First Bancorp (NYSE:FBP), ChemoCentryx Inc (NASDAQ:CCXI), and WSFS Financial Corporation (NASDAQ:WSFS). This group of stocks’ market caps are similar to PGNY’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| SCL | 13 | 71721 | -2 |
| FBP | 32 | 194396 | 11 |
| CCXI | 23 | 531676 | 6 |
| WSFS | 16 | 174571 | 5 |
| Average | 21 | 243091 | 5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 21 hedge funds with bullish positions and the average amount invested in these stocks was $243 million. That figure was $20 million in PGNY’s case. First Bancorp (NYSE:FBP) is the most popular stock in this table. On the other hand Stepan Company (NYSE:SCL) is the least popular one with only 13 bullish hedge fund positions. Compared to these stocks Progyny, Inc. (NASDAQ:PGNY) is even less popular than SCL. Hedge funds dodged a bullet by taking a bearish stance towards PGNY. Our calculations showed that the top 20 most popular hedge fund stocks returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 13.0% in 2020 through April 6th but managed to beat the market by 4.2 percentage points. Unfortunately PGNY wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); PGNY investors were disappointed as the stock returned -30.9% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as most of these stocks already outperformed the market so far in 2020.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.