Is Phibro Animal Health Corp (PAHC) A Good Stock To Buy?

It seems that the masses and most of the financial media hate hedge funds and what they do, but why is this hatred of hedge funds so prominent? At the end of the day, these asset management firms do not gamble the hard-earned money of the people who are on the edge of poverty. Truth be told, most hedge fund managers and other smaller players within this industry are very smart and skilled investors. Of course, they may also make wrong bets in some instances, but no one knows what the future holds and how market participants will react to the bountiful news that floods in each day. The S&P 500 Index gained 7.6% in the 12 month-period that ended November 21, while less than 49% of its stocks beat the benchmark. In contrast, the 30 most popular mid-cap stocks among the top hedge fund investors tracked by the Insider Monkey team returned 18% over the same period, which provides evidence that these money managers do have great stock picking abilities. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like Phibro Animal Health Corp (NASDAQ:PAHC) .

Phibro Animal Health Corp (NASDAQ:PAHC) has seen a decrease in enthusiasm from smart money recently. PAHC was in 11 hedge funds’ portfolios at the end of September. There were 13 hedge funds in our database with PAHC holdings at the end of the previous quarter. At the end of this article we will also compare PAHC to other stocks including Delek US Holdings, Inc. (NYSE:DK), Primoris Services Corp (NASDAQ:PRIM), and Mpg Office Trust Inc (NYSE:MPG) to get a better sense of its popularity.

At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.

Keeping this in mind, let’s check out the latest action regarding Phibro Animal Health Corp (NASDAQ:PAHC).

How are hedge funds trading Phibro Animal Health Corp (NASDAQ:PAHC)?

At Q3’s end, a total of 11 of the hedge funds tracked by Insider Monkey were long this stock, a change of -15% from the second quarter of 2016. On the other hand, there were a total of 10 hedge funds with a bullish position in PAHC at the beginning of this year. With hedge funds’ positions undergoing their usual ebb and flow, there exists an “upper tier” of key hedge fund managers who were increasing their stakes considerably (or already accumulated large positions).

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Joseph A. Jolson’s Harvest Capital Strategies has the number one position in Phibro Animal Health Corp (NASDAQ:PAHC), worth close to $6.8 million, comprising 1% of its total 13F portfolio. Coming in second is Polaris Capital Management, led by Bernard Horn, which holds a $2.1 million position; 0.2% of its 13F portfolio is allocated to the stock. Some other professional money managers that are bullish contain Peter Algert and Kevin Coldiron’s Algert Coldiron Investors, Cliff Asness’s AQR Capital Management and Millennium Management, one of the biggest hedge funds in the world. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.

Due to the fact that Phibro Animal Health Corp (NASDAQ:PAHC) has sustained a decline in interest from hedge fund managers, we can see that there exists a select few fund managers that slashed their full holdings last quarter. Interestingly, Paul Marshall and Ian Wace’s Marshall Wace LLP dumped the biggest investment of all the investors tracked by Insider Monkey, worth an estimated $0.9 million in stock. Gavin Saitowitz and Cisco J. del Valle’s fund, Springbok Capital, also said goodbye to its stock, about $0.3 million worth.

Let’s now review hedge fund activity in other stocks similar to Phibro Animal Health Corp (NASDAQ:PAHC). These stocks are Delek US Holdings, Inc. (NYSE:DK), Primoris Services Corp (NASDAQ:PRIM), Mpg Office Trust Inc (NYSE:MPG), and Atlas Air Worldwide Holdings, Inc. (NASDAQ:AAWW). This group of stocks’ market valuations resemble PAHC’s market valuation.

As you can see these stocks had an average of 11.5 hedge funds with bullish positions and the average amount invested in these stocks was $109 million. That figure was $17 million in PAHC’s case. Delek US Holdings, Inc. (NYSE:DK) is the most popular stock in this table. On the other hand Primoris Services Corp (NASDAQ:PRIM) is the least popular one with only 8 bullish hedge fund positions. Phibro Animal Health Corp (NASDAQ:PAHC) 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 DK might be a better candidate to consider taking a long position in.