In this article we will check out the progression of hedge fund sentiment towards PRA Health Sciences Inc (NASDAQ:PRAH) and determine whether it is a good investment right now. We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also employ numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.
Is PRA Health Sciences Inc (NASDAQ:PRAH) worth your attention right now? Money managers are getting less optimistic. The number of long hedge fund bets were trimmed by 9 recently. Our calculations also showed that PRAH isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).
Video: Watch our video about the top 5 most popular hedge fund stocks.
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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 58 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out trades like this one as well as this tiny lithium play. 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 the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now we’re going to view the recent hedge fund action regarding PRA Health Sciences Inc (NASDAQ:PRAH).
What does smart money think about PRA Health Sciences Inc (NASDAQ:PRAH)?
Heading into the second quarter of 2020, a total of 29 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -24% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards PRAH over the last 18 quarters. With hedgies’ capital changing hands, there exists a few key hedge fund managers who were adding to their stakes substantially (or already accumulated large positions).
More specifically, AQR Capital Management was the largest shareholder of PRA Health Sciences Inc (NASDAQ:PRAH), with a stake worth $48.2 million reported as of the end of September. Trailing AQR Capital Management was Citadel Investment Group, which amassed a stake valued at $38.6 million. Redmile Group, Fisher Asset Management, and Polar Capital 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 Endurant Capital Management allocated the biggest weight to PRA Health Sciences Inc (NASDAQ:PRAH), around 1.46% of its 13F portfolio. Sectoral Asset Management is also relatively very bullish on the stock, dishing out 1.11 percent of its 13F equity portfolio to PRAH.
Because PRA Health Sciences Inc (NASDAQ:PRAH) has experienced falling interest from the entirety of the hedge funds we track, logic holds that there was a specific group of hedgies who sold off their positions entirely by the end of the first quarter. Intriguingly, Larry Robbins’s Glenview Capital sold off the largest position of the 750 funds followed by Insider Monkey, comprising about $28.1 million in stock, and Amy Mulderry’s Tavio Capital was right behind this move, as the fund dropped about $8.7 million worth. These transactions are interesting, as total hedge fund interest was cut by 9 funds by the end of the first quarter.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as PRA Health Sciences Inc (NASDAQ:PRAH) but similarly valued. We will take a look at Reinsurance Group of America Inc (NYSE:RGA), Vereit Inc (NYSE:VER), Healthcare Trust Of America Inc (NYSE:HTA), and Exelixis, Inc. (NASDAQ:EXEL). This group of stocks’ market valuations match PRAH’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 23.5 hedge funds with bullish positions and the average amount invested in these stocks was $408 million. That figure was $190 million in PRAH’s case. Reinsurance Group of America Inc (NYSE:RGA) is the most popular stock in this table. On the other hand Healthcare Trust Of America Inc (NYSE:HTA) is the least popular one with only 16 bullish hedge fund positions. PRA Health Sciences Inc (NASDAQ:PRAH) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 8.3% in 2020 through the end of May but still beat the market by 13.2 percentage points. Hedge funds were also right about betting on PRAH as the stock returned 24.6% in Q2 (through the end of May) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
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Disclosure: None. This article was originally published at Insider Monkey.