Is Proto Labs Inc (PRLB) A Good Stock To Buy?

Investing in hedge funds can bring large profits, but it’s not for everybody, since hedge funds are available only for high-net-worth individuals. They generate significant returns for investors to justify their large fees and they allocate a lot of time and employ a complex analysis to determine the best stocks to invest in. A particularly interesting group of stocks that hedge funds like is the small-caps. The huge amount of capital does not allow hedge funds to invest a lot in small-caps, but our research showed that their most popular small-cap ideas are less efficiently priced and generate stronger returns than their large- and mega-cap picks and the broader market. That is why we follow the hedge fund activity in the small-cap space.

Proto Labs Inc (NYSE:PRLB) was in 9 hedge funds’ portfolios at the end of September. PRLB shareholders have witnessed a decrease in hedge fund interest recently. There were 11 hedge funds in our database with PRLB holdings at the end of June. At the end of this article we will also compare PRLB to other stocks including Ollie’s Bargain Outlet Holdings Inc (NASDAQ:OLLI), Potlatch Corporation (NASDAQ:PCH), and First Midwest Bancorp Inc (NASDAQ:FMBI) to get a better sense of its popularity.

At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.

Hedge fund activity in Proto Labs Inc (NYSE:PRLB)

Heading into the fourth quarter of 2016, a total of 9 of the hedge funds tracked by Insider Monkey held long positions in this stock, an 18% fall from the second quarter of 2016. Below, you can check out the change in hedge fund sentiment towards PRLB over the last 5 quarters, which has fluctuated back and forth between 9 and 11 hedge funds owning the stock. With the smart money’s positions undergoing their usual ebb and flow, there exists a select group of noteworthy hedge fund managers who were boosting their stakes significantly (or already accumulated large positions).

Of the funds tracked by Insider Monkey, Colin Moran’s Abdiel Capital Advisors has the most valuable position in Proto Labs Inc (NYSE:PRLB), worth close to $55.3 million, amounting to 16.3% of its total 13F portfolio. Coming in second is Michael R. Weisberg of Crestwood Capital Management, with a $16.5 million position; 4.9% of its 13F portfolio is allocated to the company. Remaining members of the smart money that are bullish include Matthew A. Weatherbie’s Weatherbie Capital, Siddharth Thacker’s Signpost Capital, and Matthew Hulsizer’s PEAK6 Capital Management. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds, which is based on the performance of their 13F long positions in non-micro-cap stocks.

We already know that not all hedge funds are bullish on the stock and some hedge funds actually dropped their positions entirely. It’s worth mentioning that Constantinos J. Christofilis’ Archon Capital Management dropped the biggest position of all the investors tracked by Insider Monkey, totaling about $6.1 million in stock, and Drew Cupps’ Cupps Capital Management was right behind this move, as the fund dropped about $1 million worth of shares.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Proto Labs Inc (NYSE:PRLB) but similarly valued. These stocks are Ollie’s Bargain Outlet Holdings Inc (NASDAQ:OLLI), Potlatch Corporation (NASDAQ:PCH), First Midwest Bancorp Inc (NASDAQ:FMBI), and Heartland Express, Inc. (NASDAQ:HTLD). This group of stocks’ market valuations match PRLB’s market valuation.

As you can see these stocks had an average of 15 hedge funds with bullish positions and the average amount invested in these stocks was $104 million. That figure was $97 million in PRLB’s case. Ollie’s Bargain Outlet Holdings Inc (NASDAQ:OLLI) is the most popular stock in this table. On the other hand Potlatch Corporation (NASDAQ:PCH) is the least popular one with only 12 bullish hedge fund positions. Compared to these stocks Proto Labs Inc (NYSE:PRLB) is even less popular than PCH. Considering that hedge funds aren’t fond of this stock in relation to other companies analyzed in this article, it may be a good idea to analyze it in detail and understand why the smart money isn’t behind this stock.

Disclosure: None