It seems that the masses and most of the financial media hate hedge funds and what they do, but why is this hatred of hedge funds so prominent? At the end of the day, these asset management firms do not gamble the hard-earned money of the people who are on the edge of poverty. Truth be told, most hedge fund managers and other smaller players within this industry are very smart and skilled investors. Of course, they may also make wrong bets in some instances, but no one knows what the future holds and how market participants will react to the bountiful news that floods in each day. The Standard and Poor’s 500 Total Return Index ETFs returned approximately 27.5% in 2019 (through the end of November). Conversely, hedge funds’ top 20 large-cap stock picks generated a return of 37.4% during the same 11-month period, with the majority of these stock picks outperforming the broader market benchmark. Coincidence? It might happen to be so, but it is unlikely. Our research covering the last 18 years indicates that hedge funds’ consensus stock picks generate superior risk-adjusted returns. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like Prestige Consumer Healthcare Inc. (NYSE:PBH).
Prestige Consumer Healthcare Inc. (NYSE:PBH) has experienced an increase in enthusiasm from smart money recently. PBH was in 17 hedge funds’ portfolios at the end of the third quarter of 2019. There were 15 hedge funds in our database with PBH positions at the end of the previous quarter. Our calculations also showed that PBH isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
Video: Click the image to 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 has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (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 27.8% through November 21, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds‘ buy/sell signals. We’re going to go over the latest hedge fund action surrounding Prestige Consumer Healthcare Inc. (NYSE:PBH).
What have hedge funds been doing with Prestige Consumer Healthcare Inc. (NYSE:PBH)?
Heading into the fourth quarter of 2019, a total of 17 of the hedge funds tracked by Insider Monkey were long this stock, a change of 13% from the second quarter of 2019. By comparison, 14 hedge funds held shares or bullish call options in PBH a year ago. With hedgies’ sentiment swirling, there exists an “upper tier” of notable hedge fund managers who were boosting their stakes considerably (or already accumulated large positions).
Among these funds, Fisher Asset Management held the most valuable stake in Prestige Consumer Healthcare Inc. (NYSE:PBH), which was worth $28.9 million at the end of the third quarter. On the second spot was GLG Partners which amassed $13.7 million worth of shares. Maverick Capital, Arrowstreet Capital, 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 One Fin Capital Management allocated the biggest weight to Prestige Consumer Healthcare Inc. (NYSE:PBH), around 0.62% of its 13F portfolio. Weld Capital Management is also relatively very bullish on the stock, dishing out 0.21 percent of its 13F equity portfolio to PBH.
As aggregate interest increased, key money managers have been driving this bullishness. Weld Capital Management, managed by Minhua Zhang, assembled the largest position in Prestige Consumer Healthcare Inc. (NYSE:PBH). Weld Capital Management had $1.2 million invested in the company at the end of the quarter. David MacKnight’s One Fin Capital Management also made a $1.1 million investment in the stock during the quarter. The following funds were also among the new PBH investors: Donald Sussman’s Paloma Partners, Dmitry Balyasny’s Balyasny Asset Management, and Cliff Asness’s AQR Capital Management.
Let’s check out hedge fund activity in other stocks similar to Prestige Consumer Healthcare Inc. (NYSE:PBH). These stocks are BMC Stock Holdings, Inc. (NASDAQ:BMCH), Constellium SE (NYSE:CSTM), iRobot Corporation (NASDAQ:IRBT), and Trinseo S.A. (NYSE:TSE). This group of stocks’ market values are similar to PBH’s market value.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
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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 $209 million. That figure was $74 million in PBH’s case. Constellium SE (NYSE:CSTM) is the most popular stock in this table. On the other hand iRobot Corporation (NASDAQ:IRBT) 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 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. A small number of hedge funds were also right about betting on PBH, though not to the same extent, as the stock returned 8.9% during the first two months of the fourth quarter and outperformed the market.
Disclosure: None. This article was originally published at Insider Monkey.