Many prominent investors, including Warren Buffett, David Tepper and Stan Druckenmiller, have been cautious regarding the current bull market and missed out as the stock market reached another high in recent weeks. On the other hand, technology hedge funds weren’t timid and registered double digit market beating gains. Financials, energy and industrial stocks aren’t doing great but many of the stocks that delivered strong returns since March are still going very strong and hedge funds actually increased their positions in these stocks. In this article we will find out how hedge fund sentiment to Primoris Services Corp (NASDAQ:PRIM) changed recently.
Is PRIM a good stock to buy now? Money managers were becoming more confident. The number of long hedge fund positions inched up by 2 in recent months. Primoris Services Corp (NASDAQ:PRIM) was in 21 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistic is 19. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that PRIM 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.
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 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
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 let’s take a glance at the recent hedge fund action regarding Primoris Services Corp (NASDAQ:PRIM).
Do Hedge Funds Think PRIM Is A Good Stock To Buy Now?
At the end of September, a total of 21 of the hedge funds tracked by Insider Monkey were long this stock, a change of 11% from the second quarter of 2020. On the other hand, there were a total of 14 hedge funds with a bullish position in PRIM a year ago. With the smart money’s capital changing hands, there exists a select group of noteworthy hedge fund managers who were adding to their stakes considerably (or already accumulated large positions).
More specifically, Divisar Capital was the largest shareholder of Primoris Services Corp (NASDAQ:PRIM), with a stake worth $13.4 million reported as of the end of September. Trailing Divisar Capital was Royce & Associates, which amassed a stake valued at $11.2 million. Arrowstreet Capital, Value Holdings LP, and Intrinsic Edge 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 Divisar Capital allocated the biggest weight to Primoris Services Corp (NASDAQ:PRIM), around 4.42% of its 13F portfolio. Value Holdings LP is also relatively very bullish on the stock, designating 2.67 percent of its 13F equity portfolio to PRIM.
As one would reasonably expect, specific money managers have been driving this bullishness. GLG Partners, managed by Noam Gottesman, established the largest position in Primoris Services Corp (NASDAQ:PRIM). GLG Partners had $1.6 million invested in the company at the end of the quarter. Hoon Kim’s Quantinno Capital also made a $0.3 million investment in the stock during the quarter.
Let’s now review hedge fund activity in other stocks similar to Primoris Services Corp (NASDAQ:PRIM). We will take a look at Qiwi PLC (NASDAQ:QIWI), Dril-Quip, Inc. (NYSE:DRQ), Abercrombie & Fitch Co. (NYSE:ANF), Smith & Wesson Brands, Inc. (NASDAQ:SWBI), Ultra Clean Holdings Inc (NASDAQ:UCTT), First Busey Corporation (NASDAQ:BUSE), and iTeos Therapeutics, Inc. (NASDAQ:ITOS). This group of stocks’ market valuations resemble PRIM’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 16.3 hedge funds with bullish positions and the average amount invested in these stocks was $110 million. That figure was $76 million in PRIM’s case. Abercrombie & Fitch Co. (NYSE:ANF) is the most popular stock in this table. On the other hand Qiwi PLC (NASDAQ:QIWI) is the least popular one with only 9 bullish hedge fund positions. Primoris Services Corp (NASDAQ:PRIM) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for PRIM is 70.3. 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 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 30.7% in 2020 through December 14th and still beat the market by 15.8 percentage points. Hedge funds were also right about betting on PRIM as the stock returned 49.8% since the end of Q3 (through 12/14) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.