Hedge funds don’t get the respect they used to get. Nowadays investors prefer passive funds over actively managed funds. One thing they don’t realize is that 100% of the passive funds didn’t see the coronavirus recession coming, but a lot of hedge funds did. Even we published an article near the end of February and predicted a US recession. Think about all the losses you could have avoided if you sold your shares in February and bought them back at the end of March. In this article we will take a look at hedge funds’ collective moves over the last 4 years and analyze what the smart money thinks of Plantronics, Inc. (NYSE:PLT) based on that data.
Is Plantronics, Inc. (NYSE:PLT) a buy right now? Hedge funds are selling. The number of bullish hedge fund positions decreased by 2 recently. Our calculations also showed that PLT isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 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. 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 41 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 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.
Paul Tudor Jones of Tudor Investment Corp
We leave no stone unturned when looking for the next great investment idea. For example, this investor can predict short term winners following earnings announcements with high accuracy, so we check out his stock picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now let’s take a look at the latest hedge fund action surrounding Plantronics, Inc. (NYSE:PLT).
Hedge fund activity in Plantronics, Inc. (NYSE:PLT)
At Q4’s end, a total of 11 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -15% from the third quarter of 2019. The graph below displays the number of hedge funds with bullish position in PLT over the last 18 quarters. With the smart money’s sentiment swirling, there exists a few key hedge fund managers who were increasing their holdings significantly (or already accumulated large positions).
The largest stake in Plantronics, Inc. (NYSE:PLT) was held by Greenhouse Funds, which reported holding $16.3 million worth of stock at the end of September. It was followed by GMT Capital with a $7 million position. Other investors bullish on the company included Arrowstreet Capital, AQR Capital Management, and Invenomic Capital Management. In terms of the portfolio weights assigned to each position Greenhouse Funds allocated the biggest weight to Plantronics, Inc. (NYSE:PLT), around 2.98% of its 13F portfolio. Invenomic Capital Management is also relatively very bullish on the stock, setting aside 1.98 percent of its 13F equity portfolio to PLT.
Judging by the fact that Plantronics, Inc. (NYSE:PLT) has faced declining sentiment from the aggregate hedge fund industry, it’s safe to say that there were a few hedge funds that elected to cut their full holdings heading into Q4. It’s worth mentioning that Anthony Bozza’s Lakewood Capital Management dumped the biggest position of all the hedgies followed by Insider Monkey, totaling an estimated $20.9 million in stock. Marcelo Desio’s fund, Lucha Capital Management, also cut its stock, about $10.5 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest was cut by 2 funds heading into Q4.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Plantronics, Inc. (NYSE:PLT) but similarly valued. These stocks are United Fire Group, Inc. (NASDAQ:UFCS), Opera Limited (NASDAQ:OPRA), Mesa Laboratories, Inc. (NASDAQ:MLAB), and Playa Hotels & Resorts N.V. (NASDAQ:PLYA). This group of stocks’ market valuations are closest to PLT’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| UFCS | 6 | 10537 | -3 |
| OPRA | 15 | 22844 | 2 |
| MLAB | 10 | 110335 | 1 |
| PLYA | 18 | 506471 | 1 |
| Average | 12.25 | 162547 | 0.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 12.25 hedge funds with bullish positions and the average amount invested in these stocks was $163 million. That figure was $45 million in PLT’s case. Playa Hotels & Resorts N.V. (NASDAQ:PLYA) is the most popular stock in this table. On the other hand United Fire Group, Inc. (NASDAQ:UFCS) is the least popular one with only 6 bullish hedge fund positions. Plantronics, Inc. (NYSE:PLT) 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. 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 1.0% in 2020 through May 1st but beat the market by 12.9 percentage points. Unfortunately PLT wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); PLT investors were disappointed as the stock returned -47.8% 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 most of these stocks already outperformed the market in 2020.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
