Is Planet Fitness (PLNT) Stock A Buy or Sell?

Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the fourth quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 5 years and analyze what the smart money thinks of Planet Fitness Inc (NYSE:PLNT) based on that data.

Is PLNT stock a buy or sell? Planet Fitness Inc (NYSE:PLNT) shareholders have witnessed an increase in support from the world’s most elite money managers in recent months. Planet Fitness Inc (NYSE:PLNT) was in 47 hedge funds’ portfolios at the end of December. The all time high for this statistic is 45. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. There were 45 hedge funds in our database with PLNT positions at the end of the third quarter. Our calculations also showed that PLNT isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings).

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 124 percentage points since March 2017 (see the details here).

Ryan Frick Dorsal Capital

Ryan Frick of Dorsal Capital

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. Recently Oregon became the first state to legalize psychedelic mushrooms which are shown to have promising results in treating depression, addiction, and PTSD in early stage academic studies. So, we are checking out this psychedelic drug stock idea right now. We go through lists like the 10 best biotech stocks to invest in to pick the next stock that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage (or at the end of this article).With all of this in mind let’s take a look at the fresh hedge fund action surrounding Planet Fitness Inc (NYSE:PLNT).

Do Hedge Funds Think PLNT Is A Good Stock To Buy Now?

At the end of December, a total of 47 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 4% from one quarter earlier. By comparison, 34 hedge funds held shares or bullish call options in PLNT a year ago. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, SRS Investment Management held the most valuable stake in Planet Fitness Inc (NYSE:PLNT), which was worth $547.1 million at the end of the fourth quarter. On the second spot was Steadfast Capital Management which amassed $238.2 million worth of shares. Third Point, Broad Bay Capital, and Dorsal Capital Management 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 Broad Bay Capital allocated the biggest weight to Planet Fitness Inc (NYSE:PLNT), around 13.34% of its 13F portfolio. Deep Field Asset Management is also relatively very bullish on the stock, designating 9.4 percent of its 13F equity portfolio to PLNT.

As one would reasonably expect, some big names were leading the bulls’ herd. Dorsal Capital Management, managed by Ryan Frick and Oliver Evans, initiated the biggest position in Planet Fitness Inc (NYSE:PLNT). Dorsal Capital Management had $64 million invested in the company at the end of the quarter. Edmond M. Safra’s EMS Capital also made a $56.7 million investment in the stock during the quarter. The following funds were also among the new PLNT investors: Brennan Diaz’s Fernbridge Capital Management, Leonard A. Potter’s Wildcat Capital Management, and Paul Marshall and Ian Wace’s Marshall Wace LLP.

Let’s check out hedge fund activity in other stocks similar to Planet Fitness Inc (NYSE:PLNT). We will take a look at nCino, Inc. (NASDAQ:NCNO), Manhattan Associates, Inc. (NASDAQ:MANH), PVH Corp (NYSE:PVH), Post Holdings Inc (NYSE:POST), ITT Inc. (NYSE:ITT), Futu Holdings Limited (NASDAQ:FUTU), and Kilroy Realty Corp (NYSE:KRC). This group of stocks’ market values are similar to PLNT’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
NCNO 28 177115 2
MANH 23 288212 1
PVH 37 1132304 9
POST 27 1536661 -3
ITT 28 406807 -2
FUTU 17 334170 2
KRC 25 251572 6
Average 26.4 589549 2.1

View table here if you experience formatting issues.

As you can see these stocks had an average of 26.4 hedge funds with bullish positions and the average amount invested in these stocks was $590 million. That figure was $1705 million in PLNT’s case. PVH Corp (NYSE:PVH) is the most popular stock in this table. On the other hand Futu Holdings Limited (NASDAQ:FUTU) is the least popular one with only 17 bullish hedge fund positions. Compared to these stocks Planet Fitness Inc (NYSE:PLNT) is more popular among hedge funds. Our overall hedge fund sentiment score for PLNT is 87. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks gained 5.3% in 2021 through March 19th and still beat the market by 0.8 percentage points. Unfortunately PLNT wasn’t nearly as popular as these 30 stocks and hedge funds that were betting on PLNT were disappointed as the stock returned 0.9% since the end of the fourth quarter (through 3/19) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 30 most popular stocks among hedge funds as most of these stocks already outperformed the market since 2019.

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