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Hedge Funds Are Nibbling On PerkinElmer, Inc. (PKI)

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 821 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 March 31st, a week after the market trough. In this article we look at what those investors think of PerkinElmer, Inc. (NYSE:PKI).

Is PerkinElmer, Inc. (NYSE:PKI) a buy right now? Hedge funds are betting on the stock. The number of bullish hedge fund positions advanced by 1 in recent months. Our calculations also showed that PKI isn’t among the 30 most popular stocks among hedge funds (click for Q1 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.

So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 more than 58 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. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.

Phill Gross of Adage Capital Management

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out trades like this one. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. 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 the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now let’s take a look at the new hedge fund action regarding PerkinElmer, Inc. (NYSE:PKI).

What have hedge funds been doing with PerkinElmer, Inc. (NYSE:PKI)?

At Q1’s end, a total of 21 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 5% from one quarter earlier. By comparison, 25 hedge funds held shares or bullish call options in PKI a year ago. With hedgies’ positions undergoing their usual ebb and flow, there exists a few noteworthy hedge fund managers who were boosting their holdings significantly (or already accumulated large positions).

The largest stake in PerkinElmer, Inc. (NYSE:PKI) was held by Select Equity Group, which reported holding $438.5 million worth of stock at the end of September. It was followed by Impax Asset Management with a $91.9 million position. Other investors bullish on the company included Echo Street Capital Management, Adage Capital Management, and Millennium Management. In terms of the portfolio weights assigned to each position Select Equity Group allocated the biggest weight to PerkinElmer, Inc. (NYSE:PKI), around 3.02% of its 13F portfolio. Echo Street Capital Management is also relatively very bullish on the stock, earmarking 1.62 percent of its 13F equity portfolio to PKI.

As one would reasonably expect, key hedge funds were breaking ground themselves. Millennium Management, managed by Israel Englander, initiated the largest position in PerkinElmer, Inc. (NYSE:PKI). Millennium Management had $8.1 million invested in the company at the end of the quarter. Joel Greenblatt’s Gotham Asset Management also initiated a $4 million position during the quarter. The following funds were also among the new PKI investors: Bhagwan Jay Rao’s Integral Health Asset Management, Mika Toikka’s AlphaCrest Capital Management, and Ryan Tolkin (CIO)’s Schonfeld Strategic Advisors.

Let’s also examine hedge fund activity in other stocks similar to PerkinElmer, Inc. (NYSE:PKI). We will take a look at Autohome Inc (NYSE:ATHM), Carvana Co. (NYSE:CVNA), Lamb Weston Holdings, Inc. (NYSE:LW), and Phillips 66 Partners LP (NYSE:PSXP). This group of stocks’ market values are closest to PKI’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
ATHM 15 708219 2
CVNA 52 1819908 -1
LW 29 277239 -3
PSXP 5 13913 0
Average 25.25 704820 -0.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 25.25 hedge funds with bullish positions and the average amount invested in these stocks was $705 million. That figure was $648 million in PKI’s case. Carvana Co. (NYSE:CVNA) is the most popular stock in this table. On the other hand Phillips 66 Partners LP (NYSE:PSXP) is the least popular one with only 5 bullish hedge fund positions. PerkinElmer, Inc. (NYSE:PKI) is not the least popular stock in this group but hedge fund interest is still below average. 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 12.2% in 2020 through June 17th and still beat the market by 14.8 percentage points. A small number of hedge funds were also right about betting on PKI as the stock returned 31.1% during the second quarter and outperformed the market by an even larger margin.

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