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. Although the masses and most of the financial media blame hedge funds for their exorbitant fee structure and disappointing performance, these investors have proved to have great stock picking abilities over the years (that’s why their assets under management continue to swell). We believe hedge fund sentiment should serve as a crucial tool of an individual investor’s stock selection process, as it may offer great insights of how the brightest minds of the finance industry feel about specific stocks. After all, these people have access to smartest analysts and expensive data/information sources that individual investors can’t match. So should one consider investing in Prestige Consumer Healthcare Inc. (NYSE:PBH)? The smart money sentiment can provide an answer to this question.
Prestige Consumer Healthcare Inc. (NYSE:PBH) has seen a decrease in hedge fund sentiment of late. Our calculations also showed that PBH 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).
To the average investor there are dozens of gauges stock market investors put to use to value stocks. A couple of the less known gauges are hedge fund and insider trading interest. We have shown that, historically, those who follow the top picks of the best hedge fund managers can outperform their index-focused peers by a very impressive amount (see the details here).
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 go over the key hedge fund action encompassing Prestige Consumer Healthcare Inc. (NYSE:PBH).
How are hedge funds trading Prestige Consumer Healthcare Inc. (NYSE:PBH)?
Heading into the first quarter of 2020, a total of 14 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -22% from the previous quarter. On the other hand, there were a total of 15 hedge funds with a bullish position in PBH a year ago. With hedgies’ positions undergoing their usual ebb and flow, there exists an “upper tier” of notable hedge fund managers who were boosting their stakes meaningfully (or already accumulated large positions).
More specifically, Fisher Asset Management was the largest shareholder of Prestige Consumer Healthcare Inc. (NYSE:PBH), with a stake worth $33 million reported as of the end of September. Trailing Fisher Asset Management was Arrowstreet Capital, which amassed a stake valued at $32.3 million. GLG Partners, Citadel Investment Group, and D E Shaw 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 Algert Coldiron Investors allocated the biggest weight to Prestige Consumer Healthcare Inc. (NYSE:PBH), around 0.35% of its 13F portfolio. GLG Partners is also relatively very bullish on the stock, dishing out 0.08 percent of its 13F equity portfolio to PBH.
Judging by the fact that Prestige Consumer Healthcare Inc. (NYSE:PBH) has faced bearish sentiment from hedge fund managers, we can see that there is a sect of hedgies that decided to sell off their entire stakes in the third quarter. Interestingly, Lee Ainslie’s Maverick Capital cut the largest position of all the hedgies followed by Insider Monkey, valued at about $6.8 million in stock. Israel Englander’s fund, Millennium Management, also cut its stock, about $4 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest was cut by 4 funds in the third quarter.
Let’s now review hedge fund activity in other stocks similar to Prestige Consumer Healthcare Inc. (NYSE:PBH). We will take a look at Myriad Genetics, Inc. (NASDAQ:MYGN), Ambarella Inc (NASDAQ:AMBA), Renasant Corporation (NASDAQ:RNST), and Coca-Cola Consolidated, Inc. (NASDAQ:COKE). This group of stocks’ market valuations are closest to PBH’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 16 hedge funds with bullish positions and the average amount invested in these stocks was $135 million. That figure was $100 million in PBH’s case. Ambarella Inc (NASDAQ:AMBA) is the most popular stock in this table. On the other hand Coca-Cola Consolidated, Inc. (NASDAQ:COKE) is the least popular one with only 11 bullish hedge fund positions. Prestige Consumer Healthcare Inc. (NYSE:PBH) is not the least popular stock in this group but hedge fund interest is still below average. 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 still beat the market by 4.2 percentage points. A small number of hedge funds were also right about betting on PBH as the stock returned -3.3% during the same time period and outperformed the market by an even larger margin.
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.