Polaris Industries Inc. (PII): Are Hedge Funds Right About This Stock?

Hedge funds run by legendary names like Nelson Peltz and David Tepper make billions of dollars a year for themselves and their super-rich accredited investors (you’ve got to have a minimum of $1 million liquid to invest in a hedge fund) by spending enormous resources on analyzing and uncovering data about small-cap stocks that the big brokerage houses don’t follow. Small caps are where they can generate significant outperformance. That’s why we pay special attention to hedge fund activity in these stocks.

Is Polaris Industries Inc. (NYSE:PII) a first-rate stock to buy now? Investors who are in the know are turning bullish. The number of long hedge fund positions went up by 2 in recent months. Our calculations also showed that PII isn’t among the 30 most popular stocks among hedge funds.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 18 percentage points since May 2014 through December 3, 2018 (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 24% through December 3, 2018. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

D. E. Shaw

Let’s view the latest hedge fund action surrounding Polaris Industries Inc. (NYSE:PII).

How are hedge funds trading Polaris Industries Inc. (NYSE:PII)?

At the end of the third quarter, a total of 17 of the hedge funds tracked by Insider Monkey were long this stock, a change of 13% from the previous quarter. The graph below displays the number of hedge funds with bullish position in PII over the last 13 quarters. With hedgies’ sentiment swirling, there exists a few key hedge fund managers who were boosting their holdings considerably (or already accumulated large positions).


Among these funds, Arrowstreet Capital held the most valuable stake in Polaris Industries Inc. (NYSE:PII), which was worth $47.1 million at the end of the third quarter. On the second spot was Shellback Capital which amassed $14.8 million worth of shares. Moreover, Millennium Management, D E Shaw, and PDT Partners were also bullish on Polaris Industries Inc. (NYSE:PII), allocating a large percentage of their portfolios to this stock.

Consequently, some big names were leading the bulls’ herd. Shellback Capital, managed by Doug Gordon, Jon Hilsabeck and Don Jabro, created the largest position in Polaris Industries Inc. (NYSE:PII). Shellback Capital had $14.8 million invested in the company at the end of the quarter. Matthew Hulsizer’s PEAK6 Capital Management also made a $3.4 million investment in the stock during the quarter. The following funds were also among the new PII investors: Michael Platt and William Reeves’s BlueCrest Capital Mgmt., David Costen Haley’s HBK Investments, and Mike Vranos’s Ellington.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Polaris Industries Inc. (NYSE:PII) but similarly valued. These stocks are Hill-Rom Holdings, Inc. (NYSE:HRC), Insulet Corporation (NASDAQ:PODD), Liberty Property Trust (NYSE:LPT), and Methanex Corporation (NASDAQ:MEOH). This group of stocks’ market valuations resemble PII’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
HRC 24 661837 1
PODD 22 471669 -2
LPT 18 400987 -3
MEOH 21 301336 3
Average 21.25 458957 -0.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 21.25 hedge funds with bullish positions and the average amount invested in these stocks was $459 million. That figure was $104 million in PII’s case. Hill-Rom Holdings, Inc. (NYSE:HRC) is the most popular stock in this table. On the other hand Liberty Property Trust (NYSE:LPT) is the least popular one with only 18 bullish hedge fund positions. Compared to these stocks Polaris Industries Inc. (NYSE:PII) is even less popular than LPT. 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. This isn’t necessarily bad news. Although it is possible that hedge funds may think the stock is overpriced and view the stock as a short candidate, they may not be very familiar with the bullish thesis. In either case more research is warranted.

Disclosure: None. This article was originally published at Insider Monkey.