Out of thousands of stocks that are currently traded on the market, it is difficult to identify those that will really generate strong returns. Hedge funds and institutional investors spend millions of dollars on analysts with MBAs and PhDs, who are industry experts and well connected to other industry and media insiders on top of that. Individual investors can piggyback the hedge funds employing these talents and can benefit from their vast resources and knowledge in that way. We analyze quarterly 13F filings of nearly 750 hedge funds and, by looking at the smart money sentiment that surrounds a stock, we can determine whether it has the potential to beat the market over the long-term. Therefore, let’s take a closer look at what smart money thinks about Party City Holdco Inc (NYSE:PRTY).
Is Party City Holdco Inc (NYSE:PRTY) ready to rally soon? The best stock pickers are in a bullish mood. The number of bullish hedge fund positions inched up by 1 lately. Our calculations also showed that prty isn’t among the 30 most popular stocks among hedge funds. PRTY was in 19 hedge funds’ portfolios at the end of March. There were 18 hedge funds in our database with PRTY positions at the end of the previous quarter.
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. 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 market by 40 percentage points since May 2014 through May 30, 2019 (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.
Let’s check out the latest hedge fund action surrounding Party City Holdco Inc (NYSE:PRTY).
What does the smart money think about Party City Holdco Inc (NYSE:PRTY)?
At Q1’s end, a total of 19 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 6% from the previous quarter. The graph below displays the number of hedge funds with bullish position in PRTY over the last 15 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Nantahala Capital Management, managed by Wilmot B. Harkey and Daniel Mack, holds the biggest position in Party City Holdco Inc (NYSE:PRTY). Nantahala Capital Management has a $31.3 million position in the stock, comprising 1% of its 13F portfolio. Sitting at the No. 2 spot is Ken Griffin of Citadel Investment Group, with a $14.7 million position; less than 0.1%% of its 13F portfolio is allocated to the stock. Other professional money managers that hold long positions comprise Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, Chuck Royce’s Royce & Associates and Mark Travis’s Intrepid Capital Management.
As one would reasonably expect, key hedge funds were breaking ground themselves. Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, created the largest position in Party City Holdco Inc (NYSE:PRTY). Arrowstreet Capital had $5 million invested in the company at the end of the quarter. Chuck Royce’s Royce & Associates also initiated a $3.8 million position during the quarter. The other funds with new positions in the stock are Marc Majzner’s Clearline Capital, Minhua Zhang’s Weld Capital Management, and John Overdeck and David Siegel’s Two Sigma Advisors.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Party City Holdco Inc (NYSE:PRTY) but similarly valued. We will take a look at Everi Holdings Inc (NYSE:EVRI), INTL Fcstone Inc (NASDAQ:INTL), Verso Corporation (NYSE:VRS), and Laredo Petroleum Inc (NYSE:LPI). All of these stocks’ market caps match PRTY’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 20.75 hedge funds with bullish positions and the average amount invested in these stocks was $163 million. That figure was $69 million in PRTY’s case. Everi Holdings Inc (NYSE:EVRI) is the most popular stock in this table. On the other hand INTL Fcstone Inc (NASDAQ:INTL) is the least popular one with only 15 bullish hedge fund positions. Party City Holdco Inc (NYSE:PRTY) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and 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 1.9% in Q2 through May 30th and outperformed the S&P 500 ETF (SPY) by more than 3 percentage points. Unfortunately PRTY wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); PRTY investors were disappointed as the stock returned -2.5% during the same time period 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 13 of these stocks already outperformed the market so far in Q2.
Disclosure: None. This article was originally published at Insider Monkey.