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Pure Cycle Corporation (PCYO): Are Hedge Funds Right About This Stock?

Before we spend countless hours researching a company, we like to analyze what insiders, hedge funds and billionaire investors think of the stock first. This is a necessary first step in our investment process because our research has shown that the elite investors’ consensus returns have been exceptional. In the following paragraphs, we find out what the billionaire investors and hedge funds think of Pure Cycle Corporation (NASDAQ:PCYO).

Pure Cycle Corporation (NASDAQ:PCYO) shares haven’t seen a lot of action during the third quarter. Overall, hedge fund sentiment was unchanged. The stock was in 7 hedge funds’ portfolios at the end of September. At the end of this article we will also compare PCYO to other stocks including eGain Corporation (NASDAQ:EGAN), FTS International, Inc. (NYSE:FTSI), and Accuray Incorporated (NASDAQ:ARAY) to get a better sense of its popularity.
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

If you’d ask most traders, hedge funds are viewed as unimportant, old financial tools of yesteryear. While there are more than 8000 funds in operation today, We hone in on the bigwigs of this club, around 750 funds. These investment experts handle most of all hedge funds’ total capital, and by monitoring their first-class investments, Insider Monkey has found numerous investment strategies that have historically surpassed the broader indices. Insider Monkey’s flagship short hedge fund strategy exceeded the S&P 500 short ETFs by around 20 percentage points per year since its inception in May 2014. Our portfolio of short stocks lost 27.8% since February 2017 (through November 21st) even though the market was up more than 39% during the same period. We just shared a list of 7 short targets in our latest quarterly update .

Paul Reeder PAR Capital Management

Paul Reeder of PAR Capital Management

We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds‘ buy/sell signals. Let’s take a gander at the key hedge fund action regarding Pure Cycle Corporation (NASDAQ:PCYO).

What does smart money think about Pure Cycle Corporation (NASDAQ:PCYO)?

At the end of the third quarter, a total of 7 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from one quarter earlier. On the other hand, there were a total of 9 hedge funds with a bullish position in PCYO a year ago. With hedgies’ positions undergoing their usual ebb and flow, there exists an “upper tier” of notable hedge fund managers who were increasing their stakes substantially (or already accumulated large positions).

According to Insider Monkey’s hedge fund database, PAR Capital Management, managed by Paul Reeder, holds the biggest position in Pure Cycle Corporation (NASDAQ:PCYO). PAR Capital Management has a $61.5 million position in the stock, comprising 1.1% of its 13F portfolio. Coming in second is Trigran Investments, managed by Douglas T. Granat, which holds a $16.4 million position; the fund has 3.1% of its 13F portfolio invested in the stock. Other peers with similar optimism include Chuck Royce’s Royce & Associates, Charles Paquelet’s Skylands Capital and Renaissance Technologies. In terms of the portfolio weights assigned to each position Trigran Investments allocated the biggest weight to Pure Cycle Corporation (NASDAQ:PCYO), around 3.09% of its 13F portfolio. PAR Capital Management is also relatively very bullish on the stock, designating 1.06 percent of its 13F equity portfolio to PCYO.

Earlier we told you that the aggregate hedge fund interest in the stock was unchanged and we view this as a negative development. Even though there weren’t any hedge funds dumping their holdings during the third quarter, there weren’t any hedge funds initiating brand new positions. This indicates that hedge funds, at the very best, perceive this stock as dead money and they haven’t identified any viable catalysts that can attract investor attention.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Pure Cycle Corporation (NASDAQ:PCYO) but similarly valued. These stocks are eGain Corporation (NASDAQ:EGAN), FTS International, Inc. (NYSE:FTSI), Accuray Incorporated (NASDAQ:ARAY), and ACNB Corporation (NASDAQ:ACNB). This group of stocks’ market caps match PCYO’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
EGAN 10 28062 -2
FTSI 14 8141 -4
ARAY 18 49199 1
ACNB 1 3139 0
Average 10.75 22135 -1.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 10.75 hedge funds with bullish positions and the average amount invested in these stocks was $22 million. That figure was $85 million in PCYO’s case. Accuray Incorporated (NASDAQ:ARAY) is the most popular stock in this table. On the other hand ACNB Corporation (NASDAQ:ACNB) is the least popular one with only 1 bullish hedge fund positions. Pure Cycle Corporation (NASDAQ:PCYO) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. A small number of hedge funds were also right about betting on PCYO as the stock returned 20.8% during the first two months of Q4 and outperformed the market by an even larger margin.

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

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