Was The Smart Money Right About Piling Into Planet Fitness Inc (PLNT)?

Out of thousands of stocks that are currently traded on the market, it is difficult to identify those that will really generate strong returns. Hedge funds and institutional investors spend millions of dollars on analysts with MBAs and PhDs, who are industry experts and well connected to other industry and media insiders on top of that. Individual investors can piggyback the hedge funds employing these talents and can benefit from their vast resources and knowledge in that way. We analyze quarterly 13F filings of nearly 900 hedge funds and, by looking at the smart money sentiment that surrounds a stock, we can determine whether it has the potential to beat the market over the long-term. Therefore, let’s take a closer look at what smart money thinks about Planet Fitness Inc (NYSE:PLNT).

Planet Fitness Inc (NYSE:PLNT) investors should pay attention to an increase in support from the world’s most elite money managers recently. Planet Fitness Inc (NYSE:PLNT) was in 47 hedge funds’ portfolios at the end of the fourth quarter of 2020. The all time high for this statistic was previously 45. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. There were 45 hedge funds in our database with PLNT holdings at the end of September. Our calculations also showed that PLNT isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings).

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. Hedge funds have more than $3.5 trillion in assets under management, so you can’t expect their entire portfolios to beat the market by large margins. 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 124 percentage points since March 2017 (see the details here). So you can still find a lot of gems by following hedge funds’ moves today.

Ryan Frick Dorsal Capital

Ryan Frick of Dorsal Capital

At Insider Monkey we leave no stone unturned when looking for 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 hydrogen fuel cell 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. Now let’s analyze the latest hedge fund action regarding Planet Fitness Inc (NYSE:PLNT).

Do Hedge Funds Think PLNT Is A Good Stock To Buy Now?

At the end of the fourth quarter, a total of 47 of the hedge funds tracked by Insider Monkey were long this stock, a change of 4% from the previous quarter. The graph below displays the number of hedge funds with bullish position in PLNT over the last 22 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, SRS Investment Management was the largest shareholder of Planet Fitness Inc (NYSE:PLNT), with a stake worth $547.1 million reported as of the end of December. Trailing SRS Investment Management was Steadfast Capital Management, which amassed a stake valued at $238.2 million. Third Point, Broad Bay Capital, and Dorsal Capital 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 Broad Bay Capital allocated the biggest weight to Planet Fitness Inc (NYSE:PLNT), around 13.34% of its 13F portfolio. Deep Field Asset Management is also relatively very bullish on the stock, earmarking 9.4 percent of its 13F equity portfolio to PLNT.

With a general bullishness amongst the heavyweights, specific money managers were breaking ground themselves. Dorsal Capital Management, managed by Ryan Frick and Oliver Evans, assembled the most valuable position in Planet Fitness Inc (NYSE:PLNT). Dorsal Capital Management had $64 million invested in the company at the end of the quarter. Edmond M. Safra’s EMS Capital also made a $56.7 million investment in the stock during the quarter. The other funds with new positions in the stock are Brennan Diaz’s Fernbridge Capital Management, Leonard A. Potter’s Wildcat Capital Management, and Paul Marshall and Ian Wace’s Marshall Wace LLP.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Planet Fitness Inc (NYSE:PLNT) but similarly valued. These stocks are nCino, Inc. (NASDAQ:NCNO), Manhattan Associates, Inc. (NASDAQ:MANH), PVH Corp (NYSE:PVH), Post Holdings Inc (NYSE:POST), ITT Inc. (NYSE:ITT), Futu Holdings Limited (NASDAQ:FUTU), and Kilroy Realty Corp (NYSE:KRC). This group of stocks’ market caps resemble PLNT’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
NCNO 28 177115 2
MANH 23 288212 1
PVH 37 1132304 9
POST 27 1536661 -3
ITT 28 406807 -2
FUTU 17 334170 2
KRC 25 251572 6
Average 26.4 589549 2.1

View table here if you experience formatting issues.

As you can see these stocks had an average of 26.4 hedge funds with bullish positions and the average amount invested in these stocks was $590 million. That figure was $1705 million in PLNT’s case. PVH Corp (NYSE:PVH) is the most popular stock in this table. On the other hand Futu Holdings Limited (NASDAQ:FUTU) is the least popular one with only 17 bullish hedge fund positions. Compared to these stocks Planet Fitness Inc (NYSE:PLNT) is more popular among hedge funds. Our overall hedge fund sentiment score for PLNT is 87. 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 90.7% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 35 percentage points. These stocks gained 13.6% in 2021 through April 30th and still beat the market by 1.6 percentage points. Unfortunately PLNT wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on PLNT were disappointed as the stock returned 8.2% since the end of the fourth quarter (through 4/30) 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 most of these stocks already outperformed the market since 2019.

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