Looking for stocks with high upside potential? Just follow the big players within the hedge fund industry. Why should you do so? Let’s take a brief look at what statistics have to say about hedge funds’ stock picking abilities to illustrate. The Standard and Poor’s 500 Index returned approximately 26% in 2019 (through November 22nd). Conversely, hedge funds’ 20 preferred S&P 500 stocks generated a return of nearly 35% during the same period, with the majority of these stock picks outperforming the broader market benchmark. Coincidence? It might happen to be so, but it is unlikely. Our research covering the last 18 years indicates that hedge funds’ consensus stock picks generate superior risk-adjusted returns. That’s why we believe it is wise to check hedge fund activity before you invest your time or your savings on a stock like PROS Holdings, Inc. (NYSE:PRO).
PROS Holdings, Inc. (NYSE:PRO) investors should be aware of an increase in hedge fund sentiment lately. Our calculations also showed that PRO isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
According to most stock holders, hedge funds are viewed as worthless, outdated investment tools of the past. While there are more than 8000 funds trading at present, We look at the aristocrats of this club, about 750 funds. These hedge fund managers control the lion’s share of the hedge fund industry’s total asset base, and by tailing their inimitable picks, Insider Monkey has formulated a few investment strategies that have historically outpaced Mr. Market. Insider Monkey’s flagship short hedge fund strategy outpaced the S&P 500 short ETFs by around 20 percentage points per year since its inception in May 2014. Our portfolio of short stocks lost 27.8% since February 2017 (through November 21st) even though the market was up more than 39% during the same period. We just shared a list of 7 short targets in our latest quarterly update .
Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world’s most bearish hedge fund that’s more convinced than ever that a crash is coming, our long-short investment strategy doesn’t rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds‘ buy/sell signals. Let’s go over the key hedge fund action encompassing PROS Holdings, Inc. (NYSE:PRO).
What have hedge funds been doing with PROS Holdings, Inc. (NYSE:PRO)?
At Q3’s end, a total of 24 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 50% from the previous quarter. The graph below displays the number of hedge funds with bullish position in PRO over the last 17 quarters. With the smart money’s capital changing hands, there exists an “upper tier” of notable hedge fund managers who were upping their stakes substantially (or already accumulated large positions).
The largest stake in PROS Holdings, Inc. (NYSE:PRO) was held by Renaissance Technologies, which reported holding $83.1 million worth of stock at the end of September. It was followed by Whetstone Capital Advisors with a $35.8 million position. Other investors bullish on the company included Citadel Investment Group, Two Sigma Advisors, and Millennium Management. In terms of the portfolio weights assigned to each position Whetstone Capital Advisors allocated the biggest weight to PROS Holdings, Inc. (NYSE:PRO), around 9.62% of its portfolio. G2 Investment Partners Management is also relatively very bullish on the stock, dishing out 2.7 percent of its 13F equity portfolio to PRO.
As one would reasonably expect, key money managers were breaking ground themselves. Tremblant Capital, managed by Brett Barakett, established the largest position in PROS Holdings, Inc. (NYSE:PRO). Tremblant Capital had $14.8 million invested in the company at the end of the quarter. David E. Shaw’s D E Shaw also initiated a $1.8 million position during the quarter. The other funds with brand new PRO positions are Matthew Hulsizer’s PEAK6 Capital Management, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, and Alec Litowitz and Ross Laser’s Magnetar Capital.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as PROS Holdings, Inc. (NYSE:PRO) but similarly valued. We will take a look at AAON, Inc. (NASDAQ:AAON), Fox Factory Holding Corp (NASDAQ:FOXF), PennyMac Financial Services Inc (NYSE:PFSI), and Granite Real Estate Investment Trust (NYSE:GRP). All of these stocks’ market caps resemble PRO’s market cap.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 11 hedge funds with bullish positions and the average amount invested in these stocks was $53 million. That figure was $240 million in PRO’s case. PennyMac Financial Services Inc (NYSE:PFSI) is the most popular stock in this table. On the other hand AAON, Inc. (NASDAQ:AAON) is the least popular one with only 6 bullish hedge fund positions. Compared to these stocks PROS Holdings, Inc. (NYSE:PRO) is more popular among hedge funds. 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 PRO wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on PRO were disappointed as the stock returned 4.5% during the first two months of the fourth quarter 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 70 percent of these stocks already outperformed the market in Q4.
Disclosure: None. This article was originally published at Insider Monkey.