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Hedge Funds Are Buying Back Perspecta Inc. (PRSP)

The latest 13F reporting period has come and gone, and Insider Monkey have plowed through 823 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 June 30th, when the S&P 500 Index was trading around the 3100 level. Since the end of March, investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned more than 50% since its bottom. In this article you are going to find out whether hedge funds thought Perspecta Inc. (NYSE:PRSP) was a good investment heading into the third quarter and how the stock traded in comparison to the top hedge fund picks.

Perspecta Inc. (NYSE:PRSP) shareholders have witnessed an increase in activity from the world’s largest hedge funds in recent months. Perspecta Inc. (NYSE:PRSP) was in 46 hedge funds’ portfolios at the end of the second quarter of 2020. The all time high for this statistics is 50. Our calculations also showed that PRSP 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).

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

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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 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.

Barry Rosenstein JANA PARTNERS

Barry Rosenstein of JANA Partners

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. Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost precious metals prices. So, we are checking out this junior gold mining stock. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. 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. Keeping this in mind we’re going to take a look at the fresh hedge fund action surrounding Perspecta Inc. (NYSE:PRSP).

How are hedge funds trading Perspecta Inc. (NYSE:PRSP)?

Heading into the third quarter of 2020, a total of 46 of the hedge funds tracked by Insider Monkey were long this stock, a change of 44% from the previous quarter. By comparison, 40 hedge funds held shares or bullish call options in PRSP a year ago. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, JANA Partners was the largest shareholder of Perspecta Inc. (NYSE:PRSP), with a stake worth $217.5 million reported as of the end of September. Trailing JANA Partners was Samlyn Capital, which amassed a stake valued at $43.5 million. D E Shaw, Point72 Asset Management, and Maverick Capital 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 JANA Partners allocated the biggest weight to Perspecta Inc. (NYSE:PRSP), around 20.42% of its 13F portfolio. Lion Point is also relatively very bullish on the stock, designating 5.07 percent of its 13F equity portfolio to PRSP.

Now, key money managers have jumped into Perspecta Inc. (NYSE:PRSP) headfirst. JANA Partners, managed by Barry Rosenstein, initiated the largest position in Perspecta Inc. (NYSE:PRSP). JANA Partners had $217.5 million invested in the company at the end of the quarter. Michael Doheny’s Freshford Capital Management also made a $22.2 million investment in the stock during the quarter. The following funds were also among the new PRSP investors: Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, Israel Englander’s Millennium Management, and Kenneth Squire’s 13D Management.

Let’s now review hedge fund activity in other stocks similar to Perspecta Inc. (NYSE:PRSP). We will take a look at BRP Inc. (NASDAQ:DOOO), Curtiss-Wright Corp. (NYSE:CW), YETI Holdings, Inc. (NYSE:YETI), Flowserve Corporation (NYSE:FLS), Grocery Outlet Holding Corp. (NASDAQ:GO), Tempur Sealy International Inc. (NYSE:TPX), and Dicks Sporting Goods Inc (NYSE:DKS). This group of stocks’ market values are similar to PRSP’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
DOOO 14 149741 4
CW 26 257924 5
YETI 22 155265 2
FLS 30 251403 1
GO 19 137772 2
TPX 46 1023259 8
DKS 40 493110 13
Average 28.1 352639 5

View table here if you experience formatting issues.

As you can see these stocks had an average of 28.1 hedge funds with bullish positions and the average amount invested in these stocks was $353 million. That figure was $654 million in PRSP’s case. Tempur Sealy International Inc. (NYSE:TPX) is the most popular stock in this table. On the other hand BRP Inc. (NASDAQ:DOOO) is the least popular one with only 14 bullish hedge fund positions. Perspecta Inc. (NYSE:PRSP) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for PRSP is 87.6. 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. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. 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 33% in 2020 through the end of August and beat the market by 23.2 percentage points. Unfortunately PRSP wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on PRSP were disappointed as the stock returned -10.3% 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 10 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.

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