We know that hedge funds generate strong, risk-adjusted returns over the long run, which is why imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, professional investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do. However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, let’s examine the smart money sentiment towards Perrigo Company plc (NYSE:PRGO) and determine whether hedge funds skillfully traded this stock.
Is Perrigo Company plc (NYSE:PRGO) the right pick for your portfolio? The smart money was becoming hopeful. The number of bullish hedge fund positions went up by 5 lately. Perrigo Company plc (NYSE:PRGO) was in 33 hedge funds’ portfolios at the end of the second quarter of 2020. The all time high for this statistics is 63. Our calculations also showed that PRGO 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.
At the moment there are a multitude of formulas market participants employ to size up publicly traded companies. A couple of the less utilized formulas are hedge fund and insider trading moves. We have shown that, historically, those who follow the top picks of the top investment managers can trounce the S&P 500 by a solid margin (see the details here).
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, this “mom” trader turned $2000 into $2 million within 2 years. So, we are checking out her best trade idea of the month. Cannabis stocks are roaring back in 2020, which is why we are also checking out this under-the-radar stock. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. 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. With all of this in mind we’re going to take a glance at the new hedge fund action regarding Perrigo Company plc (NYSE:PRGO).
Hedge fund activity in Perrigo Company plc (NYSE:PRGO)
Heading into the third quarter of 2020, a total of 33 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 18% from the first quarter of 2020. The graph below displays the number of hedge funds with bullish position in PRGO over the last 20 quarters. With the smart money’s positions undergoing their usual ebb and flow, there exists an “upper tier” of notable hedge fund managers who were upping their holdings considerably (or already accumulated large positions).
According to Insider Monkey’s hedge fund database, Stephen DuBois’s Camber Capital Management has the number one position in Perrigo Company plc (NYSE:PRGO), worth close to $124.4 million, comprising 7.1% of its total 13F portfolio. The second largest stake is held by Ken Griffin of Citadel Investment Group, with a $84.5 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Remaining hedge funds and institutional investors that are bullish comprise Ric Dillon’s Diamond Hill Capital, Justin John Ferayorni’s Tamarack Capital Management and John Overdeck and David Siegel’s Two Sigma Advisors. In terms of the portfolio weights assigned to each position Tamarack Capital Management allocated the biggest weight to Perrigo Company plc (NYSE:PRGO), around 7.31% of its 13F portfolio. Camber Capital Management is also relatively very bullish on the stock, earmarking 7.11 percent of its 13F equity portfolio to PRGO.
As one would reasonably expect, key hedge funds have jumped into Perrigo Company plc (NYSE:PRGO) headfirst. Sphera Global Healthcare Fund, managed by Doron Breen and Mori Arkin, created the largest position in Perrigo Company plc (NYSE:PRGO). Sphera Global Healthcare Fund had $2.8 million invested in the company at the end of the quarter. D. E. Shaw’s D E Shaw also made a $2.7 million investment in the stock during the quarter. The other funds with new positions in the stock are Renaissance Technologies, Greg Poole’s Echo Street Capital Management, and Jerome Pfund and Michael Sjostrom’s Sectoral Asset Management.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Perrigo Company plc (NYSE:PRGO) but similarly valued. These stocks are GCI Liberty, Inc. (NASDAQ:GLIBA), Snap-on Incorporated (NYSE:SNA), Trex Company, Inc. (NYSE:TREX), Iron Mountain Incorporated (NYSE:IRM), Textron Inc. (NYSE:TXT), The Scotts Miracle-Gro Company (NYSE:SMG), and Molson Coors Beverage Company (NYSE:TAP). This group of stocks’ market caps match PRGO’s market cap.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 30.4 hedge funds with bullish positions and the average amount invested in these stocks was $525 million. That figure was $447 million in PRGO’s case. GCI Liberty, Inc. (NASDAQ:GLIBA) is the most popular stock in this table. On the other hand Snap-on Incorporated (NYSE:SNA) is the least popular one with only 20 bullish hedge fund positions. Perrigo Company plc (NYSE:PRGO) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for PRGO is 45.4. 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. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. 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 33% in 2020 through the end of August and beat the market by 23.2 percentage points. Unfortunately PRGO wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on PRGO were disappointed as the stock returned -5% during the same time period 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 many of these stocks already outperformed the market so far this year.
Disclosure: None. This article was originally published at Insider Monkey.