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Hedge Funds Never Been This Bullish On Pool Corporation (POOL)

We know that hedge funds generate strong, risk-adjusted returns over the long run, which is why imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, professional investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do. However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, let’s examine the smart money sentiment towards Pool Corporation (NASDAQ:POOL) and determine whether hedge funds skillfully traded this stock.

Pool Corporation (NASDAQ:POOL) was in 35 hedge funds’ portfolios at the end of the second quarter of 2020. The all time high for this statistics is 33. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. POOL has experienced an increase in activity from the world’s largest hedge funds lately. There were 33 hedge funds in our database with POOL positions at the end of the first quarter. Our calculations also showed that POOL isn’t among the 30 most popular stocks among hedge funds (click for Q2 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.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 56 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 34% through August 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Sahm Adrangi Kerrisdale Capital

Sahm Adrangi of Kerrisdale Capital

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost precious metals prices. So, we are checking out this junior gold mining stock. Legal marijuana is one of the fastest growing industries right now, so we are also checking out stock pitches like “the Starbucks of cannabis” to identify the next tenbagger. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. Keeping this in mind we’re going to take a peek at the key hedge fund action encompassing Pool Corporation (NASDAQ:POOL).

Hedge fund activity in Pool Corporation (NASDAQ:POOL)

At the end of June, a total of 35 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 6% from the first quarter of 2020. On the other hand, there were a total of 22 hedge funds with a bullish position in POOL a year ago. 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, Fisher Asset Management held the most valuable stake in Pool Corporation (NASDAQ:POOL), which was worth $82.5 million at the end of the third quarter. On the second spot was Impax Asset Management which amassed $79.2 million worth of shares. Echo Street Capital Management, Select Equity Group, and Chilton Investment Company 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 Aubrey Capital Management allocated the biggest weight to Pool Corporation (NASDAQ:POOL), around 3.92% of its 13F portfolio. Chilton Investment Company is also relatively very bullish on the stock, dishing out 1.49 percent of its 13F equity portfolio to POOL.

As one would reasonably expect, key hedge funds were leading the bulls’ herd. Kerrisdale Capital, managed by Sahm Adrangi, initiated the largest position in Pool Corporation (NASDAQ:POOL). Kerrisdale Capital had $9.2 million invested in the company at the end of the quarter. Brad Dunkley and Blair Levinsky’s Waratah Capital Advisors also initiated a $5.3 million position during the quarter. The other funds with brand new POOL positions are Mark Coe’s Intrinsic Edge Capital, Michael Cowley’s Sandbar Asset Management, and Ben Levine, Andrew Manuel and Stefan Renold’s LMR Partners.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Pool Corporation (NASDAQ:POOL) but similarly valued. We will take a look at KB Financial Group, Inc. (NYSE:KB), Alteryx, Inc. (NYSE:AYX), Gartner Inc (NYSE:IT), Trimble Inc. (NASDAQ:TRMB), VICI Properties Inc. (NYSE:VICI), Citizens Financial Group Inc (NYSE:CFG), and StoneCo Ltd. (NASDAQ:STNE). This group of stocks’ market valuations match POOL’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
KB 6 36329 -1
AYX 48 1612975 5
IT 32 1302132 0
TRMB 26 979865 6
VICI 51 1573468 15
CFG 47 841328 1
STNE 35 1342781 1
Average 35 1098411 3.9

View table here if you experience formatting issues.

As you can see these stocks had an average of 35 hedge funds with bullish positions and the average amount invested in these stocks was $1098 million. That figure was $492 million in POOL’s case. VICI Properties Inc. (NYSE:VICI) is the most popular stock in this table. On the other hand KB Financial Group, Inc. (NYSE:KB) is the least popular one with only 6 bullish hedge fund positions. Pool Corporation (NASDAQ:POOL) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for POOL is 69.2. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. 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 gained 33% in 2020 through the end of August and still beat the market by 23.2 percentage points. A small number of hedge funds were also right about betting on POOL as the stock returned 20.8% since the end of June and outperformed the market by an even larger margin.

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