Hedge funds and large money managers usually invest with a focus on the long-term horizon and, therefore, short-lived dips or bumps on the charts usually don’t make them change their opinion towards a company. This time it may be different. The coronavirus pandemic destroyed the high correlations among major industries and asset classes. We are now in a stock pickers market where fundamentals of a stock have more effect on the price than the overall direction of the market. As a result we observe sudden and large changes in hedge fund positions depending on the news flow. Let’s take a look at the hedge fund sentiment towards PPD, Inc. (NASDAQ:PPD) to find out whether there were any major changes in hedge funds’ views.
Hedge fund interest in PPD, Inc. (NASDAQ:PPD) shares was flat at the end of last quarter. This is usually a negative indicator. Our calculations also showed that PPD isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings). The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Hasbro, Inc. (NASDAQ:HAS), Godaddy Inc (NYSE:GDDY), and Korea Electric Power Corporation (NYSE:KEP) to gather more data points.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 more than 115 percentage points since March 2017 (see the details here). We have been able to outperform the passive index funds by tracking the moves of corporate insiders and hedge funds, and we believe small investors can benefit a lot from reading hedge fund investor letters and 13F filings.
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. 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 homepage. Keeping this in mind let’s take a look at the key hedge fund action encompassing PPD, Inc. (NASDAQ:PPD).
Do Hedge Funds Think PPD Is A Good Stock To Buy Now?
At the end of March, a total of 29 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the previous quarter. By comparison, 27 hedge funds held shares or bullish call options in PPD a year ago. With hedgies’ sentiment swirling, there exists a few notable hedge fund managers who were boosting their stakes substantially (or already accumulated large positions).
More specifically, FPR Partners was the largest shareholder of PPD, Inc. (NASDAQ:PPD), with a stake worth $237.3 million reported as of the end of March. Trailing FPR Partners was D1 Capital Partners, which amassed a stake valued at $204.9 million. Holocene Advisors, Partner Fund Management, and Park West Asset Management 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 FPR Partners allocated the biggest weight to PPD, Inc. (NASDAQ:PPD), around 6.51% of its 13F portfolio. Sectoral Asset Management is also relatively very bullish on the stock, setting aside 2.45 percent of its 13F equity portfolio to PPD.
Seeing as PPD, Inc. (NASDAQ:PPD) has experienced a decline in interest from the smart money, it’s safe to say that there lies a certain “tier” of money managers that decided to sell off their positions entirely in the first quarter. It’s worth mentioning that Efrem Kamen’s Pura Vida Investments dumped the largest stake of all the hedgies watched by Insider Monkey, valued at close to $9.7 million in stock, and Parsa Kiai’s Steamboat Capital Partners was right behind this move, as the fund said goodbye to about $8.9 million worth. These transactions are interesting, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as PPD, Inc. (NASDAQ:PPD) but similarly valued. These stocks are Hasbro, Inc. (NASDAQ:HAS), Godaddy Inc (NYSE:GDDY), Korea Electric Power Corporation (NYSE:KEP), iQIYI, Inc. (NASDAQ:IQ), Crown Holdings, Inc. (NYSE:CCK), Oak Street Health, Inc. (NYSE:OSH), and Carlyle Group Inc (NASDAQ:CG). This group of stocks’ market values match PPD’s market value.
|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 33 hedge funds with bullish positions and the average amount invested in these stocks was $1023 million. That figure was $823 million in PPD’s case. Crown Holdings, Inc. (NYSE:CCK) is the most popular stock in this table. On the other hand Korea Electric Power Corporation (NYSE:KEP) is the least popular one with only 4 bullish hedge fund positions. PPD, Inc. (NASDAQ:PPD) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for PPD is 53.7. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 22.8% in 2021 through July 2nd and still beat the market by 6 percentage points. A small number of hedge funds were also right about betting on PPD as the stock returned 22.1% since the end of the first quarter (through 7/2) and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.