Is Performance Food Group Company (NYSE:PFGC) a good stock to buy right now? We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also have numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.
Performance Food Group Company (NYSE:PFGC) was in 19 hedge funds’ portfolios at the end of June. PFGC investors should pay attention to a decrease in hedge fund sentiment of late. There were 25 hedge funds in our database with PFGC positions at the end of the previous quarter. Our calculations also showed that PFGC isn’t among the 30 most popular stocks among hedge funds (see the video below).
Video: Click the image to 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 market by 40 percentage points since May 2014 through May 30, 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. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in our short portfolio.
Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. Let’s view the recent hedge fund action encompassing Performance Food Group Company (NYSE:PFGC).
How are hedge funds trading Performance Food Group Company (NYSE:PFGC)?
At the end of the second quarter, a total of 19 of the hedge funds tracked by Insider Monkey were long this stock, a change of -24% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in PFGC over the last 16 quarters. With hedgies’ sentiment swirling, there exists a few noteworthy hedge fund managers who were increasing their holdings significantly (or already accumulated large positions).
More specifically, GLG Partners was the largest shareholder of Performance Food Group Company (NYSE:PFGC), with a stake worth $35.5 million reported as of the end of March. Trailing GLG Partners was Interval Partners, which amassed a stake valued at $28.8 million. Hoplite Capital Management, Two Sigma Advisors, and Millennium Management were also very fond of the stock, giving the stock large weights in their portfolios.
Because Performance Food Group Company (NYSE:PFGC) has faced a decline in interest from hedge fund managers, logic holds that there was a specific group of hedge funds that elected to cut their full holdings by the end of the second quarter. Interestingly, Dmitry Balyasny’s Balyasny Asset Management said goodbye to the biggest stake of all the hedgies watched by Insider Monkey, comprising close to $18.4 million in stock. Anthony Joseph Vaccarino’s fund, North Fourth Asset Management, also said goodbye to its stock, about $11 million worth. These bearish behaviors are important to note, as total hedge fund interest dropped by 6 funds by the end of the second quarter.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Performance Food Group Company (NYSE:PFGC) but similarly valued. These stocks are Ardagh Group S.A. (NYSE:ARD), RBC Bearings Incorporated (NASDAQ:ROLL), Graphic Packaging Holding Company (NYSE:GPK), and Stifel Financial Corp. (NYSE:SF). This group of stocks’ market values are closest to PFGC’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| ARD | 11 | 72786 | -1 |
| ROLL | 6 | 59579 | -5 |
| GPK | 30 | 534112 | 6 |
| SF | 15 | 160961 | -1 |
| Average | 15.5 | 206860 | -0.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 15.5 hedge funds with bullish positions and the average amount invested in these stocks was $207 million. That figure was $142 million in PFGC’s case. Graphic Packaging Holding Company (NYSE:GPK) is the most popular stock in this table. On the other hand RBC Bearings Incorporated (NASDAQ:ROLL) is the least popular one with only 6 bullish hedge fund positions. Performance Food Group Company (NYSE:PFGC) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Hedge funds were also right about betting on PFGC as the stock returned 14.9% during the third quarter and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.
