The financial regulations require hedge funds and wealthy investors that exceeded the $100 million equity holdings threshold to file a report that shows their positions at the end of every quarter. Even though it isn’t the intention, these filings to a certain extent level the playing field for ordinary investors. The latest round of 13F filings disclosed the funds’ positions on September 30th, about a month before the elections. We at Insider Monkey have made an extensive database of more than 817 of those established hedge funds and famous value investors’ filings. In this article, we analyze how these elite funds and prominent investors traded Prestige Consumer Healthcare Inc. (NYSE:PBH) based on those filings.
Is PBH a good stock to buy now? Prestige Consumer Healthcare Inc. (NYSE:PBH) investors should pay attention to a decrease in hedge fund interest lately. Prestige Consumer Healthcare Inc. (NYSE:PBH) was in 17 hedge funds’ portfolios at the end of September. The all time high for this statistic is 20. Our calculations also showed that PBH isn’t among the 30 most popular stocks among hedge funds (click for Q3 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.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 S&P 500 ETFs by more than 66 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 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. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
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 real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks 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. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. Now let’s view the key hedge fund action surrounding Prestige Consumer Healthcare Inc. (NYSE:PBH).
Do Hedge Funds Think PBH Is A Good Stock To Buy Now?
Heading into the fourth quarter of 2020, a total of 17 of the hedge funds tracked by Insider Monkey were long this stock, a change of -15% from the second quarter of 2020. Below, you can check out the change in hedge fund sentiment towards PBH over the last 21 quarters. With hedgies’ sentiment swirling, there exists an “upper tier” of notable hedge fund managers who were adding to their holdings significantly (or already accumulated large positions).
More specifically, Fisher Asset Management was the largest shareholder of Prestige Consumer Healthcare Inc. (NYSE:PBH), with a stake worth $30 million reported as of the end of September. Trailing Fisher Asset Management was GLG Partners, which amassed a stake valued at $19.8 million. AQR Capital Management, Renaissance Technologies, and Arrowstreet Capital 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 PDT Partners allocated the biggest weight to Prestige Consumer Healthcare Inc. (NYSE:PBH), around 0.12% of its 13F portfolio. GLG Partners is also relatively very bullish on the stock, designating 0.08 percent of its 13F equity portfolio to PBH.
Since Prestige Consumer Healthcare Inc. (NYSE:PBH) has witnessed declining sentiment from the aggregate hedge fund industry, we can see that there lies a certain “tier” of hedge funds that slashed their entire stakes in the third quarter. At the top of the heap, John Overdeck and David Siegel’s Two Sigma Advisors dumped the biggest stake of all the hedgies watched by Insider Monkey, valued at an estimated $1.7 million in stock, and Jinghua Yan’s TwinBeech Capital was right behind this move, as the fund cut about $0.7 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest dropped by 3 funds in the third quarter.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Prestige Consumer Healthcare Inc. (NYSE:PBH) but similarly valued. We will take a look at GrafTech International Ltd. (NYSE:EAF), TC Pipelines, LP (NYSE:TCP), Cubic Corporation (NYSE:CUB), PRA Group, Inc. (NASDAQ:PRAA), SPX FLOW, Inc. (NYSE:FLOW), Yext, Inc. (NYSE:YEXT), and American National Group Inc. (NASDAQ:ANAT). This group of stocks’ market values match PBH’s market value.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 14.7 hedge funds with bullish positions and the average amount invested in these stocks was $78 million. That figure was $110 million in PBH’s case. GrafTech International Ltd. (NYSE:EAF) is the most popular stock in this table. On the other hand TC Pipelines, LP (NYSE:TCP) is the least popular one with only 3 bullish hedge fund positions. Prestige Consumer Healthcare Inc. (NYSE:PBH) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for PBH is 57.9. 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. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 30.7% in 2020 through December 14th and beat the market again by 15.8 percentage points. Unfortunately PBH wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on PBH were disappointed as the stock returned -0.4% since the end of September (through 12/14) 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 many of these stocks already outperformed the market so far this year.
Disclosure: None. This article was originally published at Insider Monkey.