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Were Hedge Funds Right About Flocking Into Primerica, Inc. (PRI)?

Hedge Funds and other institutional investors have just completed filing their 13Fs with the Securities and Exchange Commission, revealing their equity portfolios as of the end of December. At Insider Monkey, we follow nearly 750 active hedge funds and notable investors and by analyzing their 13F filings, we can determine the stocks that they are collectively bullish on. One of their picks is Primerica, Inc. (NYSE:PRI), so let’s take a closer look at the sentiment that surrounds it in the current quarter.

Primerica, Inc. (NYSE:PRI) was in 16 hedge funds’ portfolios at the end of the fourth quarter of 2018. PRI investors should be aware of an increase in activity from the world’s largest hedge funds in recent months. There were 12 hedge funds in our database with PRI positions at the end of the previous quarter. Our calculations also showed that PRI isn’t among the 30 most popular stocks among hedge funds.

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s flagship best performing hedge funds strategy returned 20.7% year to date (through March 12th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 32 percentage points since its inception (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

William Von Mueffling - Cantillon Capital Management

Let’s take a peek at the fresh hedge fund action surrounding Primerica, Inc. (NYSE:PRI).

How are hedge funds trading Primerica, Inc. (NYSE:PRI)?

At the end of the fourth quarter, a total of 16 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 33% from the second quarter of 2018. The graph below displays the number of hedge funds with bullish position in PRI over the last 14 quarters. With hedgies’ sentiment swirling, there exists a select group of noteworthy hedge fund managers who were upping their stakes meaningfully (or already accumulated large positions).

PRI_apr2019

More specifically, Brave Warrior Capital was the largest shareholder of Primerica, Inc. (NYSE:PRI), with a stake worth $133.8 million reported as of the end of September. Trailing Brave Warrior Capital was Cantillon Capital Management, which amassed a stake valued at $92.3 million. AQR Capital Management, Prospector Partners, and GLG Partners were also very fond of the stock, giving the stock large weights in their portfolios.

Consequently, key money managers have been driving this bullishness. Brant Point Investment Management, managed by Ira Unschuld, established the most valuable position in Primerica, Inc. (NYSE:PRI). Brant Point Investment Management had $3.9 million invested in the company at the end of the quarter. Brandon Haley’s Holocene Advisors also made a $1.5 million investment in the stock during the quarter. The other funds with brand new PRI positions are Paul Tudor Jones’s Tudor Investment Corp, Matthew Tewksbury’s Stevens Capital Management, and Ronald Hua’s Qtron Investments.

Let’s go over hedge fund activity in other stocks similar to Primerica, Inc. (NYSE:PRI). These stocks are Green Dot Corporation (NYSE:GDOT), Ollie’s Bargain Outlet Holdings Inc (NASDAQ:OLLI), Cinemark Holdings, Inc. (NYSE:CNK), and ONE Gas Inc (NYSE:OGS). This group of stocks’ market valuations match PRI’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
GDOT 19 266170 -1
OLLI 24 199733 7
CNK 17 166359 -2
OGS 17 80042 2
Average 19.25 178076 1.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 19.25 hedge funds with bullish positions and the average amount invested in these stocks was $178 million. That figure was $271 million in PRI’s case. Ollie’s Bargain Outlet Holdings Inc (NASDAQ:OLLI) is the most popular stock in this table. On the other hand Cinemark Holdings, Inc. (NYSE:CNK) is the least popular one with only 17 bullish hedge fund positions. Compared to these stocks Primerica, Inc. (NYSE:PRI) is even less popular than CNK. Hedge funds clearly dropped the ball on PRI as the stock delivered strong returns, though hedge funds’ consensus picks still generated respectable returns. Our calculations showed that top 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. A small number of hedge funds were also right about betting on PRI as the stock returned 29.5% and outperformed the market by an even larger margin.

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

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