Out of thousands of stocks that are currently traded on the market, it is difficult to identify those that will really generate strong returns. Hedge funds and institutional investors spend millions of dollars on analysts with MBAs and PhDs, who are industry experts and well connected to other industry and media insiders on top of that. Individual investors can piggyback the hedge funds employing these talents and can benefit from their vast resources and knowledge in that way. We analyze quarterly 13F filings of nearly 817 hedge funds and, by looking at the smart money sentiment that surrounds a stock, we can determine whether it has the potential to beat the market over the long-term. Therefore, let’s take a closer look at what smart money thinks about Perceptron, Inc. (NASDAQ:PRCP).
Is PRCP a good stock to buy now? Perceptron, Inc. (NASDAQ:PRCP) investors should pay attention to an increase in enthusiasm from smart money of late. Perceptron, Inc. (NASDAQ:PRCP) was in 11 hedge funds’ portfolios at the end of September. The all time high for this statistics is 9. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that PRCP isn’t among the 30 most popular stocks among hedge funds (click for Q3 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.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 66 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 13% through November 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks to pick the best large-cap stocks to buy. 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 website. Keeping this in mind we’re going to take a look at the new hedge fund action regarding Perceptron, Inc. (NASDAQ:PRCP).
Do Hedge Funds Think PRCP Is A Good Stock To Buy Now?
At third quarter’s end, a total of 11 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 83% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in PRCP over the last 21 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Perceptron, Inc. (NASDAQ:PRCP) was held by Harbert Management, which reported holding $6.7 million worth of stock at the end of September. It was followed by Renaissance Technologies with a $4.7 million position. Other investors bullish on the company included Royce & Associates, Ariel Investments, and Paloma Partners. In terms of the portfolio weights assigned to each position Harbert Management allocated the biggest weight to Perceptron, Inc. (NASDAQ:PRCP), around 8.2% of its 13F portfolio. Highland Capital Management is also relatively very bullish on the stock, dishing out 0.09 percent of its 13F equity portfolio to PRCP.
Consequently, key money managers were leading the bulls’ herd. Paloma Partners, managed by Donald Sussman, established the biggest position in Perceptron, Inc. (NASDAQ:PRCP). Paloma Partners had $0.6 million invested in the company at the end of the quarter. James Dondero’s Highland Capital Management also made a $0.4 million investment in the stock during the quarter. The other funds with brand new PRCP positions are Mario Gabelli’s GAMCO Investors, John Overdeck and David Siegel’s Two Sigma Advisors, and Ken Griffin’s Citadel Investment Group.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Perceptron, Inc. (NASDAQ:PRCP) but similarly valued. These stocks are Nephros, Inc. (NASDAQ:NEPH), Cyren Ltd (NASDAQ:CYRN), ConforMIS, Inc. (NASDAQ:CFMS), EyePoint Pharmaceuticals, Inc. (NASDAQ:EYPT), Natural Health Trends Corp. (NASDAQ:NHTC), TETRA Technologies, Inc. (NYSE:TTI), and Cortland Bancorp (NASDAQ:CLDB). This group of stocks’ market caps resemble PRCP’s market cap.
|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 5 hedge funds with bullish positions and the average amount invested in these stocks was $10 million. That figure was $16 million in PRCP’s case. TETRA Technologies, Inc. (NYSE:TTI) is the most popular stock in this table. On the other hand Cortland Bancorp (NASDAQ:CLDB) is the least popular one with only 2 bullish hedge fund positions. Perceptron, Inc. (NASDAQ:PRCP) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for PRCP is 85. 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. This is a slightly positive signal but 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 percentage points. These stocks gained 32.9% in 2020 through December 8th and beat the market again by 16.2 percentage points. Unfortunately PRCP wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on PRCP were disappointed as the stock returned 2.5% since the end of September (through 12/8) 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 many of these stocks already outperformed the market so far this year.
Disclosure: None. This article was originally published at Insider Monkey.