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Hedge Funds Are Buying Pure Cycle Corporation (PCYO)

At Insider Monkey we track the activity of some of the best-performing hedge funds like Appaloosa Management, Baupost, and Third Point because we determined that some of the stocks that they are collectively bullish on can help us generate returns above the broader indices. Out of thousands of stocks that hedge funds invest in, small-caps can provide the best returns over the long term due to the fact that these companies are less efficiently priced and are usually under the radars of mass-media, analysts and dumb money. This is why we follow the smart money moves in the small-cap space.

Pure Cycle Corporation (NASDAQ:PCYO) was in 6 hedge funds’ portfolios at the end of the third quarter of 2016. PCYO investors should be aware of an increase in support from the world’s most successful money managers lately. There were 5 hedge funds in our database with PCYO holdings at the end of the previous quarter. At the end of this article we will also compare PCYO to other stocks including Points International Ltd (USA) (NASDAQ:PCOM), Ampco-Pittsburgh Corp. (NYSE:AP), and TrovaGene Inc (NASDAQ:TROV) to get a better sense of its popularity.

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At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.

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With all of this in mind, let’s review the new action regarding Pure Cycle Corporation (NASDAQ:PCYO).

How have hedgies been trading Pure Cycle Corporation (NASDAQ:PCYO)?

At the end of the third quarter, a total of 6 of the hedge funds tracked by Insider Monkey held long positions in this stock, up 20% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in PCYO over the last 5 quarters. With the smart money’s positions undergoing their usual ebb and flow, there exists a few notable hedge fund managers who were upping their stakes significantly (or already accumulated large positions).


According to Insider Monkey’s hedge fund database, Paul Reeder and Edward Shapiro’s PAR Capital Management has the number one position in Pure Cycle Corporation (NASDAQ:PCYO), worth close to $34.3 million, comprising 0.5% of its total 13F portfolio. Coming in second is Trigran Investments, led by Douglas T. Granat, holding a $12.7 million position; 3.3% of its 13F portfolio is allocated to the stock. Some other professional money managers that hold long positions consist of Chuck Royce’s Royce & Associates, Amy Minella’s Cardinal Capital and Charles Paquelet’s Skylands Capital. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.

As industrywide interest jumped, specific money managers were leading the bulls’ herd. Skylands Capital, led by Charles Paquelet, assembled the largest position in Pure Cycle Corporation (NASDAQ:PCYO). According to its latest 13F filing, the fund had $1.5 million invested in the company at the end of the quarter. Renaissance Technologies, one of the largest hedge funds in the world, also initiated a $0.2 million position during the quarter.

Let’s also examine hedge fund activity in other stocks similar to Pure Cycle Corporation (NASDAQ:PCYO). These stocks are Points International Ltd (USA) (NASDAQ:PCOM), Ampco-Pittsburgh Corp. (NYSE:AP), TrovaGene Inc (NASDAQ:TROV), and Chemung Financial Corp. (NASDAQ:CHMG). This group of stocks’ market caps match PCYO’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
PCOM 5 17456 -1
AP 4 24192 -1
TROV 4 15808 -1
CHMG 3 2925 0

As you can see these stocks had an average of 4 hedge funds with bullish positions and the average amount invested in these stocks was $15 million. That figure was $55 million in PCYO’s case. Points International Ltd (USA) (NASDAQ:PCOM) is the most popular stock in this table. On the other hand Chemung Financial Corp. (NASDAQ:CHMG) is the least popular one with only 3 bullish hedge fund positions. Compared to these stocks Pure Cycle Corporation (NASDAQ:PCYO) 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.