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Hedge Funds Are Warming Up To The Providence Service Corporation (PRSC)

We are still in an overall bull market and many stocks that smart money investors were piling into surged through the end of November. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 54% and 51% respectively. Hedge funds’ top 3 stock picks returned 41.7% this year and beat the S&P 500 ETFs by 14 percentage points. That’s a big deal.This is why following the smart money sentiment is a useful tool at identifying the next stock to invest in.

The Providence Service Corporation (NASDAQ:PRSC) was in 15 hedge funds’ portfolios at the end of the third quarter of 2019. PRSC investors should be aware of an increase in enthusiasm from smart money in recent months. There were 14 hedge funds in our database with PRSC positions at the end of the previous quarter. Our calculations also showed that PRSC isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

To the average investor there are many signals investors employ to grade stocks. A duo of the most under-the-radar signals are hedge fund and insider trading sentiment. We have shown that, historically, those who follow the best picks of the best investment managers can trounce their index-focused peers by a solid margin (see the details here).

TUDOR INVESTMENT CORP

Paul Tudor Jones of Tudor Investment Corp

We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We even check out this option genius’ weekly trade ideas. This December we recommended Adams Energy  based on an under-the-radar fund manager’s investor letter and the stock gained 20 percent. Let’s take a look at the latest hedge fund action surrounding The Providence Service Corporation (NASDAQ:PRSC).

How are hedge funds trading The Providence Service Corporation (NASDAQ:PRSC)?

Heading into the fourth quarter of 2019, a total of 15 of the hedge funds tracked by Insider Monkey were long this stock, a change of 7% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in PRSC over the last 17 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, Coliseum Capital held the most valuable stake in The Providence Service Corporation (NASDAQ:PRSC), which was worth $72.8 million at the end of the third quarter. On the second spot was Renaissance Technologies which amassed $57.3 million worth of shares. Cardinal Capital, Alta Fundamental Advisers, and Millennium Management were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Coliseum Capital allocated the biggest weight to The Providence Service Corporation (NASDAQ:PRSC), around 20.37% of its 13F portfolio. Alta Fundamental Advisers is also relatively very bullish on the stock, earmarking 7.25 percent of its 13F equity portfolio to PRSC.

With a general bullishness amongst the heavyweights, some big names were leading the bulls’ herd. Magnetar Capital, managed by Alec Litowitz and Ross Laser, established the most valuable position in The Providence Service Corporation (NASDAQ:PRSC). Magnetar Capital had $1 million invested in the company at the end of the quarter. Matthew Hulsizer’s PEAK6 Capital Management also made a $0.8 million investment in the stock during the quarter. The other funds with new positions in the stock are Donald Sussman’s Paloma Partners, Paul Tudor Jones’s Tudor Investment Corp, and David E. Shaw’s D E Shaw.

Let’s check out hedge fund activity in other stocks similar to The Providence Service Corporation (NASDAQ:PRSC). We will take a look at Diamond Offshore Drilling Inc (NYSE:DO), Cardlytics, Inc. (NASDAQ:CDLX), NanoString Technologies Inc (NASDAQ:NSTG), and Delek Logistics Partners LP (NYSE:DKL). This group of stocks’ market caps are similar to PRSC’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
DO 14 43842 1
CDLX 18 154224 8
NSTG 18 146085 -2
DKL 1 2915 0
Average 12.75 86767 1.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 12.75 hedge funds with bullish positions and the average amount invested in these stocks was $87 million. That figure was $175 million in PRSC’s case. Cardlytics, Inc. (NASDAQ:CDLX) is the most popular stock in this table. On the other hand Delek Logistics Partners LP (NYSE:DKL) is the least popular one with only 1 bullish hedge fund positions. The Providence Service Corporation (NASDAQ:PRSC) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately PRSC wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on PRSC were disappointed as the stock returned 0.4% during the fourth quarter (through the end of November) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.

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

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