We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (read our latest 10 coronavirus predictions).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 835 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of December 31st. In this article we look at what those investors think of PerkinElmer, Inc. (NYSE:PKI).
Is PerkinElmer, Inc. (NYSE:PKI) a great investment right now? Money managers are getting less optimistic. The number of bullish hedge fund bets dropped by 5 lately. Our calculations also showed that PKI isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video below for Q3 rankings).
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 S&P 500 ETFs by more than 41 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.
We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind let’s review the new hedge fund action surrounding PerkinElmer, Inc. (NYSE:PKI).
How have hedgies been trading PerkinElmer, Inc. (NYSE:PKI)?
At the end of the fourth quarter, a total of 20 of the hedge funds tracked by Insider Monkey were long this stock, a change of -20% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards PKI over the last 18 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Select Equity Group was the largest shareholder of PerkinElmer, Inc. (NYSE:PKI), with a stake worth $552.4 million reported as of the end of September. Trailing Select Equity Group was Impax Asset Management, which amassed a stake valued at $108.3 million. Echo Street Capital Management, Citadel Investment Group, and Marshall Wace LLP 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 Select Equity Group allocated the biggest weight to PerkinElmer, Inc. (NYSE:PKI), around 3.48% of its 13F portfolio. Impax Asset Management is also relatively very bullish on the stock, earmarking 1.21 percent of its 13F equity portfolio to PKI.
Seeing as PerkinElmer, Inc. (NYSE:PKI) has witnessed falling interest from the entirety of the hedge funds we track, it’s easy to see that there was a specific group of money managers that slashed their positions entirely by the end of the third quarter. Interestingly, David Harding’s Winton Capital Management said goodbye to the biggest stake of the 750 funds followed by Insider Monkey, valued at an estimated $12.7 million in stock, and Dmitry Balyasny’s Balyasny Asset Management was right behind this move, as the fund dropped about $5.3 million worth. These moves are important to note, as aggregate hedge fund interest dropped by 5 funds by the end of the third quarter.
Let’s check out hedge fund activity in other stocks similar to PerkinElmer, Inc. (NYSE:PKI). We will take a look at Eastman Chemical Company (NYSE:EMN), Teva Pharmaceutical Industries Limited (NYSE:TEVA), Liberty Media Corporation (NASDAQ:FWONK), and Banco de Chile (NYSE:BCH). This group of stocks’ market valuations match PKI’s market valuation.
|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 25.5 hedge funds with bullish positions and the average amount invested in these stocks was $888 million. That figure was $841 million in PKI’s case. Liberty Media Corporation (NASDAQ:FWONK) is the most popular stock in this table. On the other hand Banco de Chile (NYSE:BCH) is the least popular one with only 10 bullish hedge fund positions. PerkinElmer, Inc. (NYSE:PKI) 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 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 22.3% in 2020 through March 16th but beat the market by 3.2 percentage points. Unfortunately PKI wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); PKI investors were disappointed as the stock returned -31.3% during the same time period 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 most of these stocks already outperformed the market in Q1.
Disclosure: None. This article was originally published at Insider Monkey.