How do you pick the next stock to invest in? One way would be to spend days of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don’t always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding XPEL Inc. (NASDAQ:XPEL).
Is XPEL a good stock to buy now? XPEL Inc. (NASDAQ:XPEL) was in 12 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistics is 9. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. XPEL investors should pay attention to an increase in hedge fund sentiment in recent months. There were 4 hedge funds in our database with XPEL positions at the end of the second quarter. Our calculations also showed that XPEL 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.
According to most market participants, hedge funds are perceived as worthless, outdated investment tools of yesteryear. While there are more than 8000 funds in operation at present, Our experts hone in on the top tier of this club, around 850 funds. These money managers administer the majority of the smart money’s total capital, and by tailing their inimitable equity investments, Insider Monkey has discovered a number of investment strategies that have historically outpaced Mr. Market. Insider Monkey’s flagship short hedge fund strategy outstripped the S&P 500 short ETFs by around 20 percentage points a year since its inception in March 2017. Our portfolio of short stocks lost 13% since February 2017 (through November 17th) even though the market was up 65% during the same period. We just shared a list of 6 short targets in our latest quarterly update .
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 peek at the recent hedge fund action encompassing XPEL Inc. (NASDAQ:XPEL).
Do Hedge Funds Think XPEL Is A Good Stock To Buy Now?
At third quarter’s end, a total of 12 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 200% from the second quarter of 2020. Below, you can check out the change in hedge fund sentiment towards XPEL over the last 21 quarters. With hedge funds’ positions undergoing their usual ebb and flow, there exists a few noteworthy hedge fund managers who were increasing their stakes meaningfully (or already accumulated large positions).
More specifically, Driehaus Capital was the largest shareholder of XPEL Inc. (NASDAQ:XPEL), with a stake worth $7.9 million reported as of the end of September. Trailing Driehaus Capital was Citadel Investment Group, which amassed a stake valued at $1.7 million. Millennium Management, Renaissance Technologies, and Citadel Investment Group 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 Zebra Capital Management allocated the biggest weight to XPEL Inc. (NASDAQ:XPEL), around 0.47% of its 13F portfolio. Prescott Group Capital Management is also relatively very bullish on the stock, dishing out 0.28 percent of its 13F equity portfolio to XPEL.
As aggregate interest increased, key money managers were breaking ground themselves. Driehaus Capital, managed by Richard Driehaus, initiated the largest position in XPEL Inc. (NASDAQ:XPEL). Driehaus Capital had $7.9 million invested in the company at the end of the quarter. Ken Griffin’s Citadel Investment Group also initiated a $1.7 million position during the quarter. The other funds with brand new XPEL positions are Israel Englander’s Millennium Management, Renaissance Technologies, and Paul Marshall and Ian Wace’s Marshall Wace LLP.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as XPEL Inc. (NASDAQ:XPEL) but similarly valued. We will take a look at Protagonist Therapeutics, Inc. (NASDAQ:PTGX), Cohu, Inc. (NASDAQ:COHU), German American Bancorp., Inc. (NASDAQ:GABC), Collegium Pharmaceutical Inc (NASDAQ:COLL), Ranpak Holdings Corp (NYSE:PACK), Controladora Vuela Co Avcn SA CV (NYSE:VLRS), and Scholastic Corp (NASDAQ:SCHL). This group of stocks’ market values are closest to XPEL’s market value.
|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 11.3 hedge funds with bullish positions and the average amount invested in these stocks was $143 million. That figure was $16 million in XPEL’s case. Collegium Pharmaceutical Inc (NASDAQ:COLL) is the most popular stock in this table. On the other hand German American Bancorp., Inc. (NASDAQ:GABC) is the least popular one with only 4 bullish hedge fund positions. XPEL Inc. (NASDAQ:XPEL) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for XPEL is 70.8. 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 32.9% in 2020 through December 8th and still beat the market by 16.2 percentage points. Hedge funds were also right about betting on XPEL as the stock returned 76.3% since the end of Q3 (through 12/8) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.