In this article we will take a look at whether hedge funds think Porch Group, Inc. (NASDAQ:PRCH) is a good investment right now. We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, unconventional data sources, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.
Is PRCH a good stock to buy? Porch Group, Inc. (NASDAQ:PRCH) was in 27 hedge funds’ portfolios at the end of the first quarter of 2021. The all time high for this statistic is 29. PRCH investors should be aware of a decrease in enthusiasm from smart money recently. There were 29 hedge funds in our database with PRCH holdings at the end of December. Our calculations also showed that PRCH isn’t among the 30 most popular stocks among hedge funds (click for Q1 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 115 percentage points since March 2017 (see the details here). We have been able to outperform the passive index funds by tracking the moves of corporate insiders and hedge funds, and we believe small investors can benefit a lot from reading hedge fund investor letters and 13F filings.
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, economists warn of inflation flare up. So, we are checking out this backdoor gold play that has hit peak gains of 718% in a little over a year. We go through lists like the 10 best battery stocks to pick the next Tesla 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. With all of this in mind we’re going to review the fresh hedge fund action regarding Porch Group, Inc. (NASDAQ:PRCH).
Do Hedge Funds Think PRCH Is A Good Stock To Buy Now?
Heading into the second quarter of 2021, a total of 27 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -7% from the previous quarter. On the other hand, there were a total of 0 hedge funds with a bullish position in PRCH a year ago. With hedgies’ capital changing hands, there exists an “upper tier” of notable hedge fund managers who were upping their stakes significantly (or already accumulated large positions).
The largest stake in Porch Group, Inc. (NASDAQ:PRCH) was held by Southpoint Capital Advisors, which reported holding $67.3 million worth of stock at the end of December. It was followed by Sachem Head Capital with a $55.8 million position. Other investors bullish on the company included Falcon Edge Capital, Washington Harbour Partners, and Scopus Asset Management. In terms of the portfolio weights assigned to each position Kuvari Partners allocated the biggest weight to Porch Group, Inc. (NASDAQ:PRCH), around 19.84% of its 13F portfolio. Phoenician Capital is also relatively very bullish on the stock, earmarking 9.15 percent of its 13F equity portfolio to PRCH.
Because Porch Group, Inc. (NASDAQ:PRCH) has witnessed bearish sentiment from the smart money, logic holds that there exists a select few money managers that elected to cut their full holdings last quarter. It’s worth mentioning that Christian Leone’s Luxor Capital Group said goodbye to the largest investment of the 750 funds tracked by Insider Monkey, worth an estimated $28.1 million in stock, and Steve Cohen’s Point72 Asset Management was right behind this move, as the fund dumped about $22.4 million worth. These moves are important to note, as aggregate hedge fund interest was cut by 2 funds last quarter.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Porch Group, Inc. (NASDAQ:PRCH) but similarly valued. These stocks are Lantheus Holdings Inc (NASDAQ:LNTH), PAR Technology Corporation (NYSE:PAR), OceanFirst Financial Corp. (NASDAQ:OCFC), XPEL Inc. (NASDAQ:XPEL), Keros Therapeutics, Inc. (NASDAQ:KROS), Pitney Bowes Inc. (NYSE:PBI), and Stoke Therapeutics, Inc. (NASDAQ:STOK). This group of stocks’ market values are closest to PRCH’s market value.
|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 15.9 hedge funds with bullish positions and the average amount invested in these stocks was $201 million. That figure was $414 million in PRCH’s case. Pitney Bowes Inc. (NYSE:PBI) is the most popular stock in this table. On the other hand XPEL Inc. (NASDAQ:XPEL) is the least popular one with only 14 bullish hedge fund positions. Compared to these stocks Porch Group, Inc. (NASDAQ:PRCH) is more popular among hedge funds. Our overall hedge fund sentiment score for PRCH is 80.9. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 24% in 2021 through July 9th and still beat the market by 6.7 percentage points. Unfortunately PRCH wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on PRCH were disappointed as the stock returned 7.6% since the end of the first quarter (through 7/9) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 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.