The third-quarter stock market correction has turned out to resemble the situation observed during the Asian financial crisis of 1997. The two relatively short-lived corrections occurred at a time with stable interest rates, falling commodity markets, with strong-performing technology and healthcare sectors, and struggling energy sector. Similarly, the two corrections followed long periods without a correction, which had to come sooner or later and it did. Even so, several prominent hedge fund investors publicly asserted their bearish view on the current state of the U.S. equity markets, suggesting that they significantly cut their exposure to equities during the latest quarter. Having said that, it would be worthwhile to take a look at the hedge fund sentiment on Park City Group, Inc. (NASDAQ:PCYG) in order to identify whether reputable and successful top money managers continue to believe in its potential.
Park City Group was in 6 hedge funds’ portfolios at the end of the third quarter of 2015, which, at first sight suggests that the stock is not very popular among smart money investors, which is not surprising, taking into account that the company has not reported any profits for the last couple of years. Nevertheless, let’s take a closer look at what funds remained bullish on the stock heading into the fourth quarter and to get a better sense of its popularity, at the end of this article we will also compare PCYG to other stocks, including Synthetic Biologics Inc (NASDAQ:SYN), NTELOS Holdings Corp. (NASDAQ:NTLS), and Nivalis Therapeutics Inc (NASDAQ:NVLS).
According to most stock holders, hedge funds are seen as unimportant, outdated financial tools of yesteryear. While there are more than 8000 funds in operation today, Our experts look at the bigwigs of this group, approximately 700 funds. These money managers orchestrate most of the smart money’s total asset base, and by following their matchless equity investments, Insider Monkey has come up with various investment strategies that have historically surpassed the S&P 500 index. Insider Monkey’s small-cap hedge fund strategy outpaced the S&P 500 index by 12 percentage points annually for a decade in their back tests.
With all of this in mind, let’s analyze the fresh action surrounding Park City Group, Inc. (NASDAQ:PCYG).
How have hedgies been trading Park City Group, Inc. (NASDAQ:PCYG)?
At the end of the third quarter, a total of 6 of the hedge funds tracked by Insider Monkey were bullish on this stock, a decline of 14% from the second quarter. With the smart money’s capital changing hands, there exists an “upper tier” of key hedge fund managers who were upping their stakes substantially (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, York Capital Management, managed by James Dinan, holds the number one position in Park City Group, Inc. (NASDAQ:PCYG). York Capital Management has a $1.7 million position in the stock, comprising less than 0.1%% of its 13F portfolio. The second largest stake is held by Mark Broach’s Manatuck Hill Partners, with a $0.3 million position; the fund has 0.1% of its 13F portfolio invested in the stock. The remaining hedge funds and institutional investors that are bullish contain Joseph A. Jolson’s Harvest Capital Strategies, and Chuck Royce’s Royce & Associates.
We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: AQR Capital Management. One hedge fund selling its entire position doesn’t always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don’t think this is the case in this case because none of the 700+ hedge funds tracked by Insider Monkey identified PCYG as a viable investment and initiated a position in the stock.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Park City Group, Inc. (NASDAQ:PCYG) but similarly valued. We will take a look at Synthetic Biologics Inc (NASDAQ:SYN), NTELOS Holdings Corp. (NASDAQ:NTLS), Nivalis Therapeutics Inc (NASDAQ:NVLS), and Preformed Line Products Company (NASDAQ:PLPC). This group of stocks’ market caps resemble PCYG’s market cap.
|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 11 hedge funds with bullish positions and the average amount invested in these stocks was $44 million. That figure was $5 million in PCYG’s case. Nivalis Therapeutics Inc (NASDAQ:NVLS) is the most popular stock in this table. On the other hand Preformed Line Products Company (NASDAQ:PLPC) is the least popular one with only 4 bullish hedge fund positions. Park City Group, Inc. (NASDAQ:PCYG) 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. In this regard NVLS might be a better candidate to consider a long position.