How do you pick the next stock to invest in? One way would be to spend hours 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 Perrigo Company plc (NYSE:PRGO).
Is Perrigo Company plc (NYSE:PRGO) a buy? Hedge funds are getting less optimistic. The number of bullish hedge fund bets was cut by 20 recently. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as General Growth Properties Inc (NYSE:GGP), Franklin Resources, Inc. (NYSE:BEN), and Baker Hughes Incorporated (NYSE:BHI) to gather more data points.
According to most traders, hedge funds are viewed as underperforming, old investment vehicles of yesteryear. While there are more than 8,000 funds trading today, our researchers choose to focus on the aristocrats of this group, around 700 funds. Most estimates calculate that this group of people control most of all hedge funds’ total asset base, and by tracking their inimitable investments, Insider Monkey has spotted many investment strategies that have historically outperformed the S&P 500 index. Insider Monkey’s small-cap hedge fund strategy outstripped the S&P 500 index by 12 percentage points per annum for a decade in their back tests.
With all of this in mind, let’s take a peek at the fresh action regarding Perrigo Company plc (NYSE:PRGO).
What does the smart money think about Perrigo Company plc (NYSE:PRGO)?
Heading into Q4, a total of 63 of the hedge funds tracked by Insider Monkey held long positions in this stock, a 24% slide from one quarter earlier. With hedgies’ capital changing hands, there exists an “upper tier” of notable hedge fund managers who were upping their stakes significantly (or had already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, OZ Management, managed by Daniel S. Och, holds the biggest position in Perrigo Company plc (NYSE:PRGO). OZ Management has a $554.5 million position in the stock, comprising 1.9% of its 13F portfolio. Sitting in the 2 spot is James Dinan of York Capital Management, with a $482.8 million position; the billionaire has 6.4% of his firm’s 13F portfolio invested in the stock. Remaining peers that hold long positions include Eric Mindich’s Eton Park Capital, John Paulson’s Paulson & Co, and Jonathon Jacobson’s Highfields Capital Management.
Seeing as Perrigo Company plc (NYSE:PRGO) has experienced a declination in interest from hedge fund managers, we can see that there is a sect of hedge funds that slashed their entire stakes heading into Q4. At the top of the heap, Jacob Gottlieb’s Visium Asset Management dumped the biggest position of all the hedgies tracked by Insider Monkey, worth an estimated $386.6 million in stock, and Doug Silverman and Alexander Klabin’s Senator Investment Group was right behind this move, as the fund cut about $212.6 million worth of shares. These bearish behaviors are interesting, as aggregate hedge fund interest was cut by 20 funds heading into Q4.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Perrigo Company plc (NYSE:PRGO) but similarly valued. These stocks are General Growth Properties Inc (NYSE:GGP), Franklin Resources, Inc. (NYSE:BEN), Baker Hughes Incorporated (NYSE:BHI), and Hilton Worldwide Holdings Inc (NYSE:HLT). This group of stocks’ market caps are similar to PRGO’s market cap.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
As you can see these stocks had an average of 42 hedge funds with bullish positions and the average amount invested in these stocks was $1.65 billion. That figure was $4.60 billion in PRGO’s case. Baker Hughes Incorporated (NYSE:BHI) is the most popular stock in this table. On the other hand General Growth Properties Inc (NYSE:GGP) is the least popular one with only 27 bullish hedge fund positions. Compared to these stocks Perrigo Company plc (NYSE:PRGO) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers and still have more money invested in it than any of the stocks in the table, it may be a good idea to analyze it in detail and potentially include it in your portfolio, bearing in mind that sentiment took a huge hit in Q3.