Hedge fund managers like David Einhorn, Dan Loeb, or Carl Icahn became billionaires through reaping large profits for their investors, which is why piggybacking their stock picks may provide us with significant returns as well. Many hedge funds, like Paul Singer’s Elliott Management, are pretty secretive, but we can still get some insights by analyzing their quarterly 13F filings. One of the most fertile grounds for large abnormal returns is hedge funds’ most popular small-cap picks, which are not so widely followed and often trade at a discount to their intrinsic value. In this article we will check out hedge fund activity in another small-cap stock: PGT Innovations Inc. (NYSE:PGTI).
Is PGT Innovations Inc. (NYSE:PGTI) going to take off soon? Investors who are in the know are betting on the stock. The number of long hedge fund bets went up by 2 lately. Our calculations also showed that PGTI isn’t among the 30 most popular stocks among hedge funds.
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 market by 18 percentage points since May 2014 through December 3, 2018 (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.
Let’s view the latest hedge fund action regarding PGT Innovations Inc. (NYSE:PGTI).
What have hedge funds been doing with PGT Innovations Inc. (NYSE:PGTI)?
At the end of the third quarter, a total of 22 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 10% from the previous quarter. The graph below displays the number of hedge funds with bullish position in PGTI over the last 13 quarters. With hedge funds’ positions undergoing their usual ebb and flow, there exists a select group of noteworthy hedge fund managers who were upping their holdings considerably (or already accumulated large positions).
Among these funds, Renaissance Technologies held the most valuable stake in PGT Innovations Inc. (NYSE:PGTI), which was worth $86.3 million at the end of the third quarter. On the second spot was Royce & Associates which amassed $8.1 million worth of shares. Moreover, Driehaus Capital, Citadel Investment Group, and Laurion Capital Management were also bullish on PGT Innovations Inc. (NYSE:PGTI), allocating a large percentage of their portfolios to this stock.
Consequently, key money managers were breaking ground themselves. Marshall Wace LLP, managed by Paul Marshall and Ian Wace, initiated the biggest position in PGT Innovations Inc. (NYSE:PGTI). Marshall Wace LLP had $4.2 million invested in the company at the end of the quarter. George Soros’s Soros Fund Management also made a $2 million investment in the stock during the quarter. The other funds with brand new PGTI positions are Steve Cohen’s Point72 Asset Management, Alexander Mitchell’s Scopus Asset Management, and Jonathan Auerbach’s Hound Partners.
Let’s check out hedge fund activity in other stocks similar to PGT Innovations Inc. (NYSE:PGTI). We will take a look at Presidio, Inc. (NASDAQ:PSDO), SUPERVALU INC. (NYSE:SVU), Accelerate Diagnostics Inc (NASDAQ:AXDX), and AllianzGI NFJ Dividend, Interest & Premium Strategy Fund (NYSE:NFJ). This group of stocks’ market values are closest to PGTI’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| PSDO | 14 | 19163 | 8 |
| SVU | 17 | 160948 | -1 |
| AXDX | 6 | 61193 | 2 |
| NFJ | 4 | 7376 | 0 |
| Average | 10.25 | 62170 | 2.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 10.25 hedge funds with bullish positions and the average amount invested in these stocks was $62 million. That figure was $146 million in PGTI’s case. SUPERVALU INC. (NYSE:SVU) is the most popular stock in this table. On the other hand AllianzGI NFJ Dividend, Interest & Premium Strategy Fund (NYSE:NFJ) is the least popular one with only 4 bullish hedge fund positions. Compared to these stocks PGT Innovations Inc. (NYSE:PGTI) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.
Disclosure: None. This article was originally published at Insider Monkey.