Before putting in our own effort and resources into finding a good investment, we can quickly utilize hedge fund expertise to give us a quick glimpse of whether that stock could make for a good addition to our portfolios. The odds are not exactly stacked in investors’ favor when it comes to beating the market, as evidenced by the fact that less than 49% of the stocks in the S&P 500 did so during the 12-month period ending October 30. However, 63% of hedge funds’ top 30 stock picks from the index did beat the market, and returned nearly twice as much on average as the index. Thus, we can see that the tireless research and efforts of hedge funds to identify winning stocks can work to our advantage when we know how to use the data. While not all of their picks will be winners, our odds are much better following their best stock picks than trying to go it alone.
Is PharMerica Corporation (NYSE:PMC) a buy, sell, or hold? The smart money is getting more optimistic. The number of bullish hedge fund bets rose by 5 in recent months. At the end of this article we will also compare PMC to other stocks, including Atlas Air Worldwide Holdings, Inc. (NASDAQ:AAWW), HudBay Minerals Inc Ord Shs (NYSE:HBM), and StoneMor Partners L.P. (NYSE:STON) to get a better sense of its popularity.
According to most market participants, hedge funds are assumed to be slow, outdated financial tools of yesteryear. While there are more than 8000 funds in operation today, Our experts look at the bigwigs of this club, about 700 funds. These investment experts preside over bulk of the smart money’s total capital, and by observing their first-class investments, Insider Monkey has identified numerous investment strategies that have historically outstripped Mr. Market. Insider Monkey’s small-cap hedge fund strategy beat the S&P 500 index by 12 percentage points per year for a decade in their back tests.
With all of this in mind, let’s take a peek at the new action encompassing PharMerica Corporation (NYSE:PMC).
What does the smart money think about PharMerica Corporation (NYSE:PMC)?
Heading into Q4, a total of 23 of the hedge funds tracked by Insider Monkey were bullish on this stock, up by 28% from the second quarter. With hedge funds’ sentiment swirling, there exists a few noteworthy hedge fund managers who were boosting their holdings substantially (or already accumulated large positions).
Of the funds tracked by Insider Monkey, D. E. Shaw’s D E Shaw has the number one position in PharMerica Corporation (NYSE:PMC), worth close to $14.3 million, corresponding to less than 0.1% of its total 13F portfolio. Sitting at the No. 2 spot is Paulson & Co, managed by John Paulson, which holds an $12.8 million position; 0.1% of its 13F portfolio is allocated to the stock. Other hedge funds and institutional investors that are bullish encompass Clifford Fox’s Columbus Circle Investors, Israel Englander’s Millennium Management and Noam Gottesman’s GLG Partners.
As industrywide interest jumped, some big names were breaking ground themselves. Fisher Asset Management, managed by Ken Fisher, assembled the biggest position in PharMerica Corporation (NYSE:PMC) with an estimated value of $3.2 million at the end of the quarter. Matthew Tewksbury’s Stevens Capital Management also made a $0.8 million investment in the stock during the quarter. The following funds were also among the new PMC investors: Peter Muller’s PDT Partners, David Costen Haley’s HBK Investments, and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as PharMerica Corporation (NYSE:PMC) but similarly valued. We will take a look at Atlas Air Worldwide Holdings, Inc. (NASDAQ:AAWW), HudBay Minerals Inc Ord Shs (NYSE:HBM), StoneMor Partners L.P. (NYSE:STON), and Finish Line Inc (NASDAQ:FINL). This group of stocks’ market values resemble PMC’s market value.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
As you can see these stocks had an average of 15 hedge funds with bullish positions and the average amount invested in these stocks was $63 million. In the case of PMC, that figure was $86 million, which is a good sign. Finish Line Inc (NASDAQ:FINL) is the most popular stock in this table, while StoneMor Partners L.P. (NYSE:STON) is the least popular one with only 5 bullish hedge fund positions. PharMerica Corporation (NYSE:PMC) is not the most popular stock in this group, but hedge fund interest is still above average. While this is a slightly positive signal, we’d rather spend our time researching stocks that hedge funds are piling on. In this regard FINL might be a better candidate to consider a long position.