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Is PetIQ, Inc. (PETQ) Going To Burn These Hedge Funds ?

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. Insider Monkey finished processing more than 730 13F filings submitted by hedge funds and prominent investors. These filings show these funds’ portfolio positions as of June 28th, 2019. What do these smart investors think about PetIQ, Inc. (NASDAQ:PETQ)?

PetIQ, Inc. (NASDAQ:PETQ) shares haven’t seen a lot of action during the second quarter. Overall, hedge fund sentiment was unchanged. The stock was in 13 hedge funds’ portfolios at the end of the second quarter of 2019. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Stewart Information Services Corp (NYSE:STC), Despegar.com, Corp. (NYSE:DESP), and NGM Biopharmaceuticals, Inc. (NASDAQ:NGM) to gather more data points. Our calculations also showed that PETQ isn’t among the 30 most popular stocks among hedge funds (see the video below).
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s flagship best performing hedge funds strategy returned 25.8% year to date (through May 30th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 40 percentage points since its inception (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

PETQ_oct2019

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 check out the recent hedge fund action regarding PetIQ, Inc. (NASDAQ:PETQ).

How are hedge funds trading PetIQ, Inc. (NASDAQ:PETQ)?

Heading into the third quarter of 2019, a total of 13 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the previous quarter. The graph below displays the number of hedge funds with bullish position in PETQ over the last 16 quarters. With hedge funds’ capital changing hands, there exists an “upper tier” of noteworthy hedge fund managers who were increasing their stakes substantially (or already accumulated large positions).

David Keidan of Buckingham Capital

David Keidan of Buckingham Capital

More specifically, Shannon River Fund Management was the largest shareholder of PetIQ, Inc. (NASDAQ:PETQ), with a stake worth $21.1 million reported as of the end of March. Trailing Shannon River Fund Management was D E Shaw, which amassed a stake valued at $13.7 million. Buckingham Capital Management, Portolan Capital Management, and Millennium Management were also very fond of the stock, giving the stock large weights in their portfolios.

Judging by the fact that PetIQ, Inc. (NASDAQ:PETQ) has witnessed a decline in interest from the aggregate hedge fund industry, it’s safe to say that there is a sect of funds who were dropping their entire stakes by the end of the second quarter. At the top of the heap, Steven Boyd’s Armistice Capital sold off the largest investment of all the hedgies followed by Insider Monkey, valued at about $5 million in stock, and Michael Burry’s Scion Asset Management was right behind this move, as the fund sold off about $3.3 million worth. These moves are interesting, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as PetIQ, Inc. (NASDAQ:PETQ) but similarly valued. These stocks are Stewart Information Services Corp (NYSE:STC), Despegar.com, Corp. (NYSE:DESP), NGM Biopharmaceuticals, Inc. (NASDAQ:NGM), and Theravance Biopharma Inc (NASDAQ:TBPH). This group of stocks’ market values are similar to PETQ’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
STC 13 120760 -4
DESP 12 192901 -3
NGM 10 26704 10
TBPH 8 362299 -1
Average 10.75 175666 0.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 10.75 hedge funds with bullish positions and the average amount invested in these stocks was $176 million. That figure was $86 million in PETQ’s case. Stewart Information Services Corp (NYSE:STC) is the most popular stock in this table. On the other hand Theravance Biopharma Inc (NASDAQ:TBPH) is the least popular one with only 8 bullish hedge fund positions. PetIQ, Inc. (NASDAQ:PETQ) is not the most popular stock in this group but hedge fund interest is still above average. 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 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately PETQ wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on PETQ were disappointed as the stock returned -17.3% during the third 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 many of these stocks already outperformed the market so far this year.

Disclosure: None. This article was originally published at Insider Monkey.

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