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 (see why hell is coming).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. 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 December 31st. We at Insider Monkey have made an extensive database of more than 835 of those established hedge funds and famous value investors’ filings. In this article, we analyze how these elite funds and prominent investors traded Ping Identity Holding Corp. (NYSE:PING) based on those filings.
Is Ping Identity Holding Corp. (NYSE:PING) an excellent investment right now? Money managers are reducing their bets on the stock. The number of long hedge fund bets retreated by 8 in recent months. Our calculations also showed that PING isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings). PING was in 10 hedge funds’ portfolios at the end of December. There were 18 hedge funds in our database with PING positions at the end of the previous quarter.
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. 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 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.
We leave no stone unturned when looking for the next great investment idea. For example, we believe electric vehicles and energy storage are set to become giant markets, and we want to take advantage of the declining lithium prices amid the COVID-19 pandemic. So we are checking out investment opportunities like this one. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. 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. Keeping this in mind let’s check out the new hedge fund action surrounding Ping Identity Holding Corp. (NYSE:PING).
How have hedgies been trading Ping Identity Holding Corp. (NYSE:PING)?
At the end of the fourth quarter, a total of 10 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -44% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards PING over the last 18 quarters. With the smart money’s sentiment swirling, there exists a few notable hedge fund managers who were adding to their holdings significantly (or already accumulated large positions).
More specifically, Polar Capital was the largest shareholder of Ping Identity Holding Corp. (NYSE:PING), with a stake worth $12.3 million reported as of the end of September. Trailing Polar Capital was Holocene Advisors, which amassed a stake valued at $11.1 million. Alyeska Investment Group, G2 Investment Partners Management, and Columbus Circle Investors 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 G2 Investment Partners Management allocated the biggest weight to Ping Identity Holding Corp. (NYSE:PING), around 1.85% of its 13F portfolio. Tenzing Global Investors is also relatively very bullish on the stock, designating 0.28 percent of its 13F equity portfolio to PING.
Since Ping Identity Holding Corp. (NYSE:PING) has witnessed falling interest from hedge fund managers, it’s safe to say that there exists a select few hedge funds that slashed their full holdings last quarter. It’s worth mentioning that Steve Cohen’s Point72 Asset Management sold off the biggest stake of the 750 funds watched by Insider Monkey, comprising close to $9.5 million in stock, and Ken Griffin’s Citadel Investment Group was right behind this move, as the fund said goodbye to about $8.4 million worth. These transactions are important to note, as aggregate hedge fund interest dropped by 8 funds last quarter.
Let’s go over hedge fund activity in other stocks similar to Ping Identity Holding Corp. (NYSE:PING). These stocks are Columbia Financial, Inc. (NASDAQ:CLBK), SPS Commerce, Inc. (NASDAQ:SPSC), Safehold Inc. (NYSE:SAFE), and BMC Stock Holdings, Inc. (NASDAQ:BMCH). This group of stocks’ market valuations are similar to PING’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 17.75 hedge funds with bullish positions and the average amount invested in these stocks was $149 million. That figure was $39 million in PING’s case. BMC Stock Holdings, Inc. (NASDAQ:BMCH) is the most popular stock in this table. On the other hand Safehold Inc. (NYSE:SAFE) is the least popular one with only 7 bullish hedge fund positions. Ping Identity Holding Corp. (NYSE:PING) 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 13.0% in 2020 through April 6th but beat the market by 4.2 percentage points. Unfortunately PING wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); PING investors were disappointed as the stock returned -19.8% 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 2020.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.