Protective Insurance Corporation (PTVCB): Hedge Funds Cashing Out

Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the first quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 4.5 years and analyze what the smart money thinks of Protective Insurance Corporation (NASDAQ:PTVCB) based on that data.

Protective Insurance Corporation (NASDAQ:PTVCB) has seen a decrease in hedge fund interest recently. Our calculations also showed that PTVCB isn’t among the 30 most popular stocks among hedge funds (click for Q1 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.

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 58 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.

David Harding

David Harding of Winton Capital Management

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out stocks recommended/scorned by legendary Bill Miller. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind let’s go over the key hedge fund action encompassing Protective Insurance Corporation (NASDAQ:PTVCB).

What does smart money think about Protective Insurance Corporation (NASDAQ:PTVCB)?

At the end of the first quarter, a total of 5 of the hedge funds tracked by Insider Monkey were long this stock, a change of -38% from the previous quarter. The graph below displays the number of hedge funds with bullish position in PTVCB over the last 18 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in Protective Insurance Corporation (NASDAQ:PTVCB) was held by Renaissance Technologies, which reported holding $8.8 million worth of stock at the end of September. It was followed by Capital Returns Management with a $1.6 million position. Other investors bullish on the company included Arrowstreet Capital, Two Sigma Advisors, and Winton Capital Management. In terms of the portfolio weights assigned to each position Capital Returns Management allocated the biggest weight to Protective Insurance Corporation (NASDAQ:PTVCB), around 4.19% of its 13F portfolio. Renaissance Technologies is also relatively very bullish on the stock, designating 0.01 percent of its 13F equity portfolio to PTVCB.

Because Protective Insurance Corporation (NASDAQ:PTVCB) has experienced a decline in interest from hedge fund managers, it’s safe to say that there exists a select few hedgies that elected to cut their entire stakes in the first quarter. It’s worth mentioning that Mark Travis’s Intrepid Capital Management sold off the biggest stake of the 750 funds monitored by Insider Monkey, worth an estimated $5 million in stock, and Dmitry Balyasny’s Balyasny Asset Management was right behind this move, as the fund said goodbye to about $0.7 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest was cut by 3 funds in the first quarter.

Let’s also examine hedge fund activity in other stocks similar to Protective Insurance Corporation (NASDAQ:PTVCB). We will take a look at Contango Oil & Gas Company (NYSE:MCF), Universal Technical Institute, Inc. (NYSE:UTI), BioLife Solutions, Inc. (NASDAQ:BLFS), and Titan Machinery Inc. (NASDAQ:TITN). This group of stocks’ market caps resemble PTVCB’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
MCF 6 4195 -2
UTI 15 52223 4
BLFS 9 43065 -4
TITN 8 10682 1
Average 9.5 27541 -0.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 9.5 hedge funds with bullish positions and the average amount invested in these stocks was $28 million. That figure was $12 million in PTVCB’s case. Universal Technical Institute, Inc. (NYSE:UTI) is the most popular stock in this table. On the other hand Contango Oil & Gas Company (NYSE:MCF) is the least popular one with only 6 bullish hedge fund positions. Compared to these stocks Protective Insurance Corporation (NASDAQ:PTVCB) is even less popular than MCF. Hedge funds dodged a bullet by taking a bearish stance towards PTVCB. Our calculations showed that the top 10 most popular hedge fund stocks returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 8.3% in 2020 through the end of May but managed to beat the market by 13.2 percentage points. Unfortunately PTVCB wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was very bearish); PTVCB investors were disappointed as the stock returned 1.3% during the second quarter (through the end of May) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market so far in 2020.

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