Should I Avoid Performance Food Group Company (PFGC)?

The latest 13F reporting period has come and gone, and Insider Monkey have plowed through 823 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of June 30th, when the S&P 500 Index was trading around the 3100 level. Since the end of March, investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned more than 50% since its bottom. In this article you are going to find out whether hedge funds thought Performance Food Group Company (NYSE:PFGC) was a good investment heading into the third quarter and how the stock traded in comparison to the top hedge fund picks.

Performance Food Group Company (NYSE:PFGC) investors should pay attention to a decrease in hedge fund sentiment in recent months. Performance Food Group Company (NYSE:PFGC) was in 20 hedge funds’ portfolios at the end of June. The all time high for this statistics is 31. Our calculations also showed that PFGC isn’t among the 30 most popular stocks among hedge funds (click for Q2 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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 56 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 34% through August 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Steven Cohen of Point72 Asset Management

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 are checking out this junior gold mining stock and we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 10 most profitable companies in the world 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 to get excerpts of these letters in your inbox. Now let’s review the recent hedge fund action surrounding Performance Food Group Company (NYSE:PFGC).

What does smart money think about Performance Food Group Company (NYSE:PFGC)?

Heading into the third quarter of 2020, a total of 20 of the hedge funds tracked by Insider Monkey were long this stock, a change of -31% from one quarter earlier. On the other hand, there were a total of 19 hedge funds with a bullish position in PFGC a year ago. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is PFGC A Good Stock To Buy?

Among these funds, Millennium Management held the most valuable stake in Performance Food Group Company (NYSE:PFGC), which was worth $59.6 million at the end of the third quarter. On the second spot was Citadel Investment Group which amassed $32.1 million worth of shares. Point72 Asset Management, D E Shaw, and Two Sigma Advisors 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 Kehrs Ridge Capital allocated the biggest weight to Performance Food Group Company (NYSE:PFGC), around 3.68% of its 13F portfolio. Shellback Capital is also relatively very bullish on the stock, designating 1.07 percent of its 13F equity portfolio to PFGC.

Because Performance Food Group Company (NYSE:PFGC) has witnessed bearish sentiment from the smart money, it’s safe to say that there exists a select few hedge funds that decided to sell off their full holdings last quarter. At the top of the heap, Ricky Sandler’s Eminence Capital dropped the largest position of all the hedgies watched by Insider Monkey, worth close to $36.3 million in stock. Principal Global Investors’s fund, Columbus Circle Investors, also said goodbye to its stock, about $6.9 million worth. These transactions are interesting, as aggregate hedge fund interest dropped by 9 funds last quarter.

Let’s now review hedge fund activity in other stocks similar to Performance Food Group Company (NYSE:PFGC). We will take a look at Hudson Pacific Properties Inc (NYSE:HPP), The Hanover Insurance Group, Inc. (NYSE:THG), Global Blood Therapeutics Inc (NASDAQ:GBT), Cyberark Software Ltd (NASDAQ:CYBR), ICU Medical, Inc. (NASDAQ:ICUI), Wright Medical Group N.V. (NASDAQ:WMGI), and Lattice Semiconductor Corporation (NASDAQ:LSCC). This group of stocks’ market values resemble PFGC’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
HPP 24 437178 5
THG 25 133465 1
GBT 31 600038 8
CYBR 17 187436 3
ICUI 32 304412 7
WMGI 38 799962 1
LSCC 19 162880 -7
Average 26.6 375053 2.6

View table here if you experience formatting issues.

As you can see these stocks had an average of 26.6 hedge funds with bullish positions and the average amount invested in these stocks was $375 million. That figure was $216 million in PFGC’s case. Wright Medical Group N.V. (NASDAQ:WMGI) is the most popular stock in this table. On the other hand Cyberark Software Ltd (NASDAQ:CYBR) is the least popular one with only 17 bullish hedge fund positions. Performance Food Group Company (NYSE:PFGC) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for PFGC is 15.4. 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 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 24.8% in 2020 through the end of September and still beat the market by 19.3 percentage points. A small number of hedge funds were also right about betting on PFGC as the stock returned 18.8% in the third quarter and outperformed the market by an even larger margin.

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