We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (see why hell is coming).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. Most investors tend to think that hedge funds and other asset managers are worthless, as they cannot beat even simple index fund portfolios. In fact, most people expect hedge funds to compete with and outperform the bull market that we have witnessed in recent years. However, hedge funds are generally partially hedged and aim at delivering attractive risk-adjusted returns rather than following the ups and downs of equity markets hoping that they will outperform the broader market. Our research shows that certain hedge funds do have great stock picking skills (and we can identify these hedge funds in advance pretty accurately), so let’s take a glance at the smart money sentiment towards Performance Food Group Company (NYSE:PFGC).
Performance Food Group Company (NYSE:PFGC) investors should be aware of an increase in support from the world’s most elite money managers lately. PFGC was in 31 hedge funds’ portfolios at the end of the fourth quarter of 2019. There were 26 hedge funds in our database with PFGC holdings at the end of the previous quarter. Our calculations also showed that PFGC isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).
In the 21st century investor’s toolkit there are several signals stock market investors can use to assess stocks. Some of the less known signals are hedge fund and insider trading signals. Our experts have shown that, historically, those who follow the top picks of the best fund managers can outclass the market by a healthy amount (see the details here).
Israel Englander of Millennium Management
We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now we’re going to take a gander at the fresh hedge fund action surrounding Performance Food Group Company (NYSE:PFGC).
Hedge fund activity in Performance Food Group Company (NYSE:PFGC)
At the end of the fourth quarter, a total of 31 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 19% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards PFGC over the last 18 quarters. With hedgies’ positions undergoing their usual ebb and flow, there exists an “upper tier” of notable hedge fund managers who were adding to their holdings significantly (or already accumulated large positions).
The largest stake in Performance Food Group Company (NYSE:PFGC) was held by Palestra Capital Management, which reported holding $104.2 million worth of stock at the end of September. It was followed by Millennium Management with a $58.8 million position. Other investors bullish on the company included Maplelane Capital, Interval Partners, and Point72 Asset Management. In terms of the portfolio weights assigned to each position Stormborn Capital Management allocated the biggest weight to Performance Food Group Company (NYSE:PFGC), around 8.62% of its 13F portfolio. Hidden Lake Asset Management is also relatively very bullish on the stock, earmarking 7.23 percent of its 13F equity portfolio to PFGC.
As one would reasonably expect, some big names were leading the bulls’ herd. Palestra Capital Management, managed by Andrew Immerman and Jeremy Schiffman, initiated the most outsized position in Performance Food Group Company (NYSE:PFGC). Palestra Capital Management had $104.2 million invested in the company at the end of the quarter. Leon Shaulov’s Maplelane Capital also initiated a $44.1 million position during the quarter. The following funds were also among the new PFGC investors: Clint Carlson’s Carlson Capital, Brandon Haley’s Holocene Advisors, and Doug Gordon, Jon Hilsabeck and Don Jabro’s Shellback Capital.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Performance Food Group Company (NYSE:PFGC) but similarly valued. These stocks are Unum Group (NYSE:UNM), Curtiss-Wright Corp. (NYSE:CW), Nutanix, Inc. (NASDAQ:NTNX), and MKS Instruments, Inc. (NASDAQ:MKSI). This group of stocks’ market caps resemble PFGC’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| UNM | 30 | 453012 | 5 |
| CW | 22 | 405133 | -1 |
| NTNX | 32 | 855350 | 6 |
| MKSI | 28 | 445354 | 10 |
| Average | 28 | 539712 | 5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 28 hedge funds with bullish positions and the average amount invested in these stocks was $540 million. That figure was $482 million in PFGC’s case. Nutanix, Inc. (NASDAQ:NTNX) is the most popular stock in this table. On the other hand Curtiss-Wright Corp. (NYSE:CW) is the least popular one with only 22 bullish hedge fund positions. Performance Food Group Company (NYSE:PFGC) 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 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 17.4% in 2020 through March 25th but beat the market by 5.5 percentage points. Unfortunately PFGC wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on PFGC were disappointed as the stock returned -48.7% 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 many of these stocks already outperformed the market so far this year.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
