Before we spend days researching a stock idea we like to take a look at how hedge funds and billionaire investors recently traded that stock. Russell 2000 ETF (IWM) lagged the larger S&P 500 ETF (SPY) by more than 10 percentage points since the end of the third quarter of 2018. This means hedge funds that are allocating a higher percentage of their portfolio to small-cap stocks were probably underperforming the market. However, this also means that as small-cap stocks start to mean revert, these hedge funds will start delivering better returns than the S&P 500 Index funds. In this article, we will take a look at what hedge funds think about Presidio, Inc. (NASDAQ:PSDO).
Presidio, Inc. (NASDAQ:PSDO) was in 22 hedge funds’ portfolios at the end of the third quarter of 2019. PSDO investors should be aware of an increase in hedge fund sentiment lately. There were 19 hedge funds in our database with PSDO positions at the end of the previous quarter. Our calculations also showed that PSDO isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
Video: Click the image to 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 hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (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 27.8% through November 21, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
John Paulson of Paulson & Co
Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world’s most bearish hedge fund that’s more convinced than ever that a crash is coming, our long-short investment strategy doesn’t rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds‘ buy/sell signals. We’re going to view the recent hedge fund action regarding Presidio, Inc. (NASDAQ:PSDO).
What does smart money think about Presidio, Inc. (NASDAQ:PSDO)?
Heading into the fourth quarter of 2019, a total of 22 of the hedge funds tracked by Insider Monkey were long this stock, a change of 16% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in PSDO over the last 17 quarters. With the smart money’s capital changing hands, there exists a select group of notable hedge fund managers who were adding to their holdings significantly (or already accumulated large positions).
The largest stake in Presidio, Inc. (NASDAQ:PSDO) was held by Paulson & Co, which reported holding $44.8 million worth of stock at the end of September. It was followed by Alpine Associates with a $32.9 million position. Other investors bullish on the company included Melqart Asset Management, Sand Grove Capital Partners, and Springbok Capital. In terms of the portfolio weights assigned to each position Fort Baker Capital Management allocated the biggest weight to Presidio, Inc. (NASDAQ:PSDO), around 8.84% of its 13F portfolio. Sand Grove Capital Partners is also relatively very bullish on the stock, earmarking 3.88 percent of its 13F equity portfolio to PSDO.
Consequently, key money managers have jumped into Presidio, Inc. (NASDAQ:PSDO) headfirst. Paulson & Co, managed by John Paulson, established the most outsized position in Presidio, Inc. (NASDAQ:PSDO). Paulson & Co had $44.8 million invested in the company at the end of the quarter. Robert Emil Zoellner’s Alpine Associates also made a $32.9 million investment in the stock during the quarter. The following funds were also among the new PSDO investors: Michel Massoud’s Melqart Asset Management, Simon Davies’s Sand Grove Capital Partners, and Israel Englander’s Millennium Management.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Presidio, Inc. (NASDAQ:PSDO) but similarly valued. These stocks are Hercules Capital, Inc. (NYSE:HTGC), First Busey Corporation (NASDAQ:BUSE), CorVel Corporation (NASDAQ:CRVL), and FormFactor, Inc. (NASDAQ:FORM). This group of stocks’ market valuations resemble PSDO’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| HTGC | 9 | 23447 | -3 |
| BUSE | 10 | 43773 | -1 |
| CRVL | 14 | 139590 | -1 |
| FORM | 19 | 68794 | 5 |
| Average | 13 | 68901 | 0 |
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 $69 million. That figure was $190 million in PSDO’s case. FormFactor, Inc. (NASDAQ:FORM) is the most popular stock in this table. On the other hand Hercules Capital, Inc. (NYSE:HTGC) is the least popular one with only 9 bullish hedge fund positions. Compared to these stocks Presidio, Inc. (NASDAQ:PSDO) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately PSDO wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on PSDO were disappointed as the stock returned -2.3% during the first two months of the fourth quarter 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 70 percent of these stocks already outperformed the market in Q4.
Disclosure: None. This article was originally published at Insider Monkey.
