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Hedge Funds Are Selling Perspecta Inc. (PRSP)

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 Perspecta Inc. (NYSE:PRSP).

Perspecta Inc. (NYSE:PRSP) has seen a decrease in hedge fund interest of late. PRSP was in 32 hedge funds’ portfolios at the end of the first quarter of 2020. There were 46 hedge funds in our database with PRSP holdings at the end of the previous quarter. Our calculations also showed that PRSP 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.

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 87% since March 2017 and outperformed the S&P 500 ETFs by more than 51 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Ryan Frick Dorsal Capital

Ryan Frick of Dorsal Capital

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 glance at the key hedge fund action surrounding Perspecta Inc. (NYSE:PRSP).

Hedge fund activity in Perspecta Inc. (NYSE:PRSP)

At the end of the first quarter, a total of 32 of the hedge funds tracked by Insider Monkey were long this stock, a change of -30% from the previous quarter. On the other hand, there were a total of 34 hedge funds with a bullish position in PRSP a year ago. With hedge funds’ capital changing hands, there exists an “upper tier” of notable hedge fund managers who were upping their holdings significantly (or already accumulated large positions).

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Lee Ainslie’s Maverick Capital has the largest position in Perspecta Inc. (NYSE:PRSP), worth close to $72.5 million, comprising 1.5% of its total 13F portfolio. On Maverick Capital’s heels is Eli Cohen of Crescent Park Management, with a $31 million position; the fund has 7.5% of its 13F portfolio invested in the stock. Remaining members of the smart money that hold long positions contain D. E. Shaw’s D E Shaw, Robert Pohly’s Samlyn Capital and Ryan Frick and Oliver Evans’s Dorsal Capital Management. In terms of the portfolio weights assigned to each position Crescent Park Management allocated the biggest weight to Perspecta Inc. (NYSE:PRSP), around 7.54% of its 13F portfolio. ACK Asset Management is also relatively very bullish on the stock, designating 4.36 percent of its 13F equity portfolio to PRSP.

Since Perspecta Inc. (NYSE:PRSP) has faced declining sentiment from the entirety of the hedge funds we track, we can see that there was a specific group of money managers who were dropping their entire stakes by the end of the first quarter. Intriguingly, Michael Doheny’s Freshford Capital Management dropped the largest stake of the 750 funds monitored by Insider Monkey, comprising about $21.2 million in stock. Israel Englander’s fund, Millennium Management, also cut its stock, about $15.3 million worth. These bearish behaviors are interesting, as total hedge fund interest was cut by 14 funds by the end of the first quarter.

Let’s go over hedge fund activity in other stocks similar to Perspecta Inc. (NYSE:PRSP). We will take a look at Ollie’s Bargain Outlet Holdings Inc (NASDAQ:OLLI), Iridium Communications Inc. (NASDAQ:IRDM), Advanced Disposal Services, Inc. (NYSE:ADSW), and KBR, Inc. (NYSE:KBR). This group of stocks’ market caps are similar to PRSP’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
OLLI 19 96475 -9
IRDM 20 228723 0
ADSW 21 739563 -1
KBR 28 424712 -1
Average 22 372368 -2.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 22 hedge funds with bullish positions and the average amount invested in these stocks was $372 million. That figure was $327 million in PRSP’s case. KBR, Inc. (NYSE:KBR) is the most popular stock in this table. On the other hand Ollie’s Bargain Outlet Holdings Inc (NASDAQ:OLLI) is the least popular one with only 19 bullish hedge fund positions. Compared to these stocks Perspecta Inc. (NYSE:PRSP) is more popular among hedge funds. 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 returned 8.3% in 2020 through the end of May but still managed to beat the market by 13.2 percentage points. Hedge funds were also right about betting on PRSP as the stock returned 21.5% so far in Q2 (through the end of May) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.

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