Here is What Hedge Funds Think About Primoris Services Corp (PRIM)

Like everyone else, elite investors make mistakes. Some of their top consensus picks, such as Amazon, Facebook and Alibaba, have not done well in Q4 due to various reasons. Nevertheless, the data show elite investors’ consensus picks have done well on average over the long-term. The top 15 S&P 500 stocks among hedge funds at the end of September 2018 returned an average of 1% through March 15th whereas the S&P 500 Index ETF lost 2.2% during the same period. Because their consensus picks have done well, we pay attention to what elite funds think before doing extensive research on a stock. In this article, we take a closer look at Primoris Services Corp (NASDAQ:PRIM) from the perspective of those elite funds.

Primoris Services Corp (NASDAQ:PRIM) was in 9 hedge funds’ portfolios at the end of December. PRIM has experienced an increase in hedge fund sentiment in recent months. There were 8 hedge funds in our database with PRIM holdings at the end of the previous quarter. Our calculations also showed that PRIM isn’t among the 30 most popular stocks among hedge funds.

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 32 percentage points since May 2014 through March 12, 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.

John Overdeck of Two Sigma

We’re going to take a look at the fresh hedge fund action surrounding Primoris Services Corp (NASDAQ:PRIM).

How are hedge funds trading Primoris Services Corp (NASDAQ:PRIM)?

At Q4’s end, a total of 9 of the hedge funds tracked by Insider Monkey were long this stock, a change of 13% from the second quarter of 2018. The graph below displays the number of hedge funds with bullish position in PRIM over the last 14 quarters. 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, Renaissance Technologies held the most valuable stake in Primoris Services Corp (NASDAQ:PRIM), which was worth $7.8 million at the end of the fourth quarter. On the second spot was Divisar Capital which amassed $5.2 million worth of shares. Moreover, Citadel Investment Group, Millennium Management, and Two Sigma Advisors were also bullish on Primoris Services Corp (NASDAQ:PRIM), allocating a large percentage of their portfolios to this stock.

Consequently, key hedge funds were leading the bulls’ herd. Divisar Capital, managed by Steven Baughman, initiated the largest position in Primoris Services Corp (NASDAQ:PRIM). Divisar Capital had $5.2 million invested in the company at the end of the quarter. Gavin Saitowitz and Cisco J. del Valle’s Springbok Capital also initiated a $0 million position during the quarter.

Let’s now review hedge fund activity in other stocks similar to Primoris Services Corp (NASDAQ:PRIM). We will take a look at Piper Jaffray Companies (NYSE:PJC), SeaDrill Limited (NYSE:SDRL), ePlus Inc. (NASDAQ:PLUS), and Baytex Energy Corp (NYSE:BTE). This group of stocks’ market caps are similar to PRIM’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
PJC 5 39248 -2
SDRL 22 320606 -2
PLUS 13 25055 3
BTE 12 52663 -9
Average 13 109393 -2.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 13 hedge funds with bullish positions and the average amount invested in these stocks was $109 million. That figure was $27 million in PRIM’s case. SeaDrill Limited (NYSE:SDRL) is the most popular stock in this table. On the other hand Piper Jaffray Companies (NYSE:PJC) is the least popular one with only 5 bullish hedge fund positions. Primoris Services Corp (NASDAQ:PRIM) 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 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. Unfortunately PRIM wasn’t nearly as popular as these 15 stock (hedge fund sentiment was quite bearish); PRIM investors were disappointed as the stock returned 15.2% and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 15 most popular stocks) among hedge funds as 13 of these stocks already outperformed the market this year.

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