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Should You Buy PerkinElmer, Inc. (PKI)?

Based on the fact that hedge funds have collectively under-performed the market for several years, it would be easy to assume that their stock picks simply aren’t very good. However, our research shows this not to be the case. In fact, when it comes to their very top picks collectively, they show a strong ability to pick winning stocks. This year hedge funds’ top 30 stock picks easily bested the broader market, at 6.7% compared to 2.6%, despite there being a few duds in there like Facebook (even their collective wisdom isn’t perfect). The results show that there is plenty of merit to imitating the collective wisdom of top investors.

PerkinElmer, Inc. (NYSE:PKI) was in 23 hedge funds’ portfolios at the end of the third quarter of 2018. PKI has experienced an increase in activity from the world’s largest hedge funds in recent months. There were 22 hedge funds in our database with PKI holdings at the end of the previous quarter. Our calculations also showed that PKI isn’t among the 30 most popular stocks among hedge funds.

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 market by 18 percentage points since May 2014 through December 3, 2018 (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. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in our short portfolio.

MILLENNIUM MANAGEMENT

We’re going to take a look at the new hedge fund action surrounding PerkinElmer, Inc. (NYSE:PKI).

Hedge fund activity in PerkinElmer, Inc. (NYSE:PKI)

At Q3’s end, a total of 23 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 5% from the previous quarter. On the other hand, there were a total of 26 hedge funds with a bullish position in PKI at the beginning of this year. With hedgies’ capital changing hands, there exists an “upper tier” of key hedge fund managers who were adding to their stakes substantially (or already accumulated large positions).

PKI_dec2018

Among these funds, Select Equity Group held the most valuable stake in PerkinElmer, Inc. (NYSE:PKI), which was worth $746.1 million at the end of the third quarter. On the second spot was Impax Asset Management which amassed $82.9 million worth of shares. Moreover, Millennium Management, Partner Fund Management, and Fisher Asset Management were also bullish on PerkinElmer, Inc. (NYSE:PKI), allocating a large percentage of their portfolios to this stock.

As aggregate interest increased, specific money managers have jumped into PerkinElmer, Inc. (NYSE:PKI) headfirst. LMR Partners, managed by Ben Levine, Andrew Manuel and Stefan Renold, created the most valuable position in PerkinElmer, Inc. (NYSE:PKI). LMR Partners had $10.4 million invested in the company at the end of the quarter. Matthew Hulsizer’s PEAK6 Capital Management also made a $4.7 million investment in the stock during the quarter. The following funds were also among the new PKI investors: Jeffrey Talpins’s Element Capital Management, Michael Platt and William Reeves’s BlueCrest Capital Mgmt., and Ken Griffin’s Citadel Investment Group.

Let’s also examine hedge fund activity in other stocks similar to PerkinElmer, Inc. (NYSE:PKI). We will take a look at Cboe Global Markets, Inc. (NASDAQ:CBOE), Sarepta Therapeutics Inc (NASDAQ:SRPT), Macy’s, Inc. (NYSE:M), and Cemex SAB de CV (NYSE:CX). This group of stocks’ market caps resemble PKI’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
CBOE 21 804776 -6
SRPT 43 1213313 -4
M 29 573651 5
CX 13 158360 0
Average 26.5 687525 -1.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 26.5 hedge funds with bullish positions and the average amount invested in these stocks was $688 million. That figure was $1.12 billion in PKI’s case. Sarepta Therapeutics Inc (NASDAQ:SRPT) is the most popular stock in this table. On the other hand Cemex SAB de CV (NYSE:CX) is the least popular one with only 13 bullish hedge fund positions. PerkinElmer, Inc. (NYSE:PKI) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard SRPT might be a better candidate to consider a long position.

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

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