While the market driven by short-term sentiment influenced by the accommodative interest rate environment in the US, virus news and stimulus talks, many smart money investors are starting to get cautious towards the current bull run since March and hedging or reducing many of their long positions. Some fund managers are betting on Dow hitting 30,000 to generate strong returns. However, as we know, big investors usually buy stocks with strong fundamentals that can deliver gains both in bull and bear markets, which is why we believe we can profit from imitating them. In this article, we are going to take a look at the smart money sentiment surrounding Perspecta Inc. (NYSE:PRSP).
Is PRSP a good stock to buy? Perspecta Inc. (NYSE:PRSP) investors should be aware of a decrease in hedge fund sentiment lately. Perspecta Inc. (NYSE:PRSP) was in 36 hedge funds’ portfolios at the end of September. The all time high for this statistic is 50. There were 46 hedge funds in our database with PRSP holdings at the end of June. Our calculations also showed that PRSP 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 leave no stone unturned when looking for the next great investment idea. For example, the House passed a landmark bill decriminalizing marijuana. So, we are checking out this under the radar cannabis stock right now. We go through lists like the 15 best blue chip stocks to buy 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. With all of this in mind let’s take a look at the fresh hedge fund action surrounding Perspecta Inc. (NYSE:PRSP).
Do Hedge Funds Think PRSP Is A Good Stock To Buy Now?
Heading into the fourth quarter of 2020, a total of 36 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 43 hedge funds with a bullish position in PRSP a year ago. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, JANA Partners held the most valuable stake in Perspecta Inc. (NYSE:PRSP), which was worth $249 million at the end of the third quarter. On the second spot was Maverick Capital which amassed $89.1 million worth of shares. D E Shaw, Point72 Asset Management, and Arrowstreet 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 JANA Partners allocated the biggest weight to Perspecta Inc. (NYSE:PRSP), around 22.27% of its 13F portfolio. Freshford Capital Management is also relatively very bullish on the stock, dishing out 4.11 percent of its 13F equity portfolio to PRSP.
Seeing as Perspecta Inc. (NYSE:PRSP) has faced falling interest from hedge fund managers, logic holds that there was a specific group of hedge funds who sold off their full holdings in the third quarter. Intriguingly, Robert Pohly’s Samlyn Capital dumped the largest position of all the hedgies followed by Insider Monkey, valued at close to $43.5 million in stock. Dmitry Balyasny’s fund, Balyasny Asset Management, also dropped its stock, about $21.9 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest was cut by 10 funds in the third quarter.
Let’s now review hedge fund activity in other stocks similar to Perspecta Inc. (NYSE:PRSP). We will take a look at Rapid7 Inc (NASDAQ:RPD), Synovus Financial Corp. (NYSE:SNV), Clean Harbors Inc (NYSE:CLH), MasTec, Inc. (NYSE:MTZ), Overstock.com, Inc. (NASDAQ:OSTK), Covetrus, Inc. (NASDAQ:CVET), and Compañía de Minas Buenaventura S.A.A. (NYSE:BVN). All of these stocks’ market caps match PRSP’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 22.7 hedge funds with bullish positions and the average amount invested in these stocks was $188 million. That figure was $689 million in PRSP’s case. MasTec, Inc. (NYSE:MTZ) is the most popular stock in this table. On the other hand Compañía de Minas Buenaventura S.A.A. (NYSE:BVN) is the least popular one with only 8 bullish hedge fund positions. Compared to these stocks Perspecta Inc. (NYSE:PRSP) is more popular among hedge funds. Our overall hedge fund sentiment score for PRSP is 66.6. 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 returned 33.3% in 2020 through December 18th but still managed to beat the market by 16.4 percentage points. Hedge funds were also right about betting on PRSP as the stock returned 21.8% since the end of September (through 12/18) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.
Disclosure: None. This article was originally published at Insider Monkey.