How do you pick the next stock to invest in? One way would be to spend days of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don’t always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding PureCycle Technologies, Inc. (NASDAQ:PCT).
PureCycle Technologies, Inc. (NASDAQ:PCT) was in 25 hedge funds’ portfolios at the end of the third quarter of 2021. The all time high for this statistic was previously 22. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. PCT investors should pay attention to an increase in hedge fund interest in recent months. There were 22 hedge funds in our database with PCT positions at the end of the second quarter. Our calculations also showed that PCT isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings).
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. Now we’re going to take a gander at the key hedge fund action surrounding PureCycle Technologies, Inc. (NASDAQ:PCT).
Robert Pohly of Samlyn Capital
Do Hedge Funds Think PCT Is A Good Stock To Buy Now?
Heading into the fourth quarter of 2021, a total of 25 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 14% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards PCT over the last 25 quarters. With hedgies’ capital changing hands, there exists a select group of notable hedge fund managers who were upping their holdings substantially (or already accumulated large positions).
The largest stake in PureCycle Technologies, Inc. (NASDAQ:PCT) was held by Sylebra Capital Management, which reported holding $236.2 million worth of stock at the end of September. It was followed by Samlyn Capital with a $48.3 million position. Other investors bullish on the company included Encompass Capital Advisors, Moore Global Investments, and Harvard Management Co. In terms of the portfolio weights assigned to each position Sylebra Capital Management allocated the biggest weight to PureCycle Technologies, Inc. (NASDAQ:PCT), around 5.32% of its 13F portfolio. Encompass Capital Advisors is also relatively very bullish on the stock, earmarking 1.29 percent of its 13F equity portfolio to PCT.
As industrywide interest jumped, key money managers were leading the bulls’ herd. Renaissance Technologies, established the biggest position in PureCycle Technologies, Inc. (NASDAQ:PCT). Renaissance Technologies had $2.5 million invested in the company at the end of the quarter. D. E. Shaw’s D E Shaw also made a $2.1 million investment in the stock during the quarter. The other funds with new positions in the stock are Paul Marshall and Ian Wace’s Marshall Wace LLP, John Overdeck and David Siegel’s Two Sigma Advisors, and Philip Hempleman’s Ardsley Partners.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as PureCycle Technologies, Inc. (NASDAQ:PCT) but similarly valued. We will take a look at RadNet Inc. (NASDAQ:RDNT), Veris Residential, Inc. (NYSE:CLI), Similarweb Ltd. (NYSE:SMWB), NexPoint Residential Trust Inc (NYSE:NXRT), Skillsoft Corp. (NYSE:SKIL), BrightView Holdings, Inc. (NYSE:BV), and Cohu, Inc. (NASDAQ:COHU). This group of stocks’ market values are closest to PCT’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| RDNT | 19 | 109205 | 2 |
| CLI | 11 | 42468 | -6 |
| SMWB | 10 | 22222 | -7 |
| NXRT | 10 | 89449 | 1 |
| SKIL | 23 | 337920 | 0 |
| BV | 9 | 188575 | -1 |
| COHU | 14 | 77605 | -1 |
| Average | 13.7 | 123921 | -1.7 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 13.7 hedge funds with bullish positions and the average amount invested in these stocks was $124 million. That figure was $381 million in PCT’s case. Skillsoft Corp. (NYSE:SKIL) is the most popular stock in this table. On the other hand BrightView Holdings, Inc. (NYSE:BV) is the least popular one with only 9 bullish hedge fund positions. Compared to these stocks PureCycle Technologies, Inc. (NASDAQ:PCT) is more popular among hedge funds. Our overall hedge fund sentiment score for PCT is 88. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 31.1% in 2021 through December 9th and still beat the market by 5.1 percentage points. Unfortunately PCT wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on PCT were disappointed as the stock returned -14.6% since the end of the third quarter (through 12/9) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market since 2019.
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Disclosure: None. This article was originally published at Insider Monkey.
