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Were Hedge Funds Right About Performance Food Group Company (PFGC)?

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 821 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of March 31st, a week after the market trough. We are almost done with the second quarter. Investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned almost 20% this quarter. In this article we look at how hedge funds traded Performance Food Group Company (NYSE:PFGC) and determine whether the smart money was really smart about this stock.

Is Performance Food Group Company (NYSE:PFGC) a healthy stock for your portfolio? Prominent investors were taking a bearish view. The number of bullish hedge fund bets were trimmed by 2 recently. Our calculations also showed that PFGC isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks). PFGC was in 29 hedge funds’ portfolios at the end of March. There were 31 hedge funds in our database with PFGC holdings at the end of the previous quarter.

Video: Watch our video about the top 5 most popular hedge fund stocks.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 58 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

David Harding

David Harding of Winton Capital Management

At Insider Monkey we scour multiple sources to uncover the next great investment idea. There is a lot of volatility in the markets and this presents amazing investment opportunities from time to time. For example, this trader claims to deliver juiced up returns with one trade a week, so we are checking out his highest conviction idea. A second trader claims to score lucrative profits by utilizing a “weekend trading strategy”, so we look into his strategy’s picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Hedge fund sentiment towards Tesla reached its all time high at the end of 2019 and Tesla shares more than tripled this year. We are trying to identify other EV revolution winners, so we are checking out this tiny lithium stock. With all of this in mind let’s go over the key hedge fund action encompassing Performance Food Group Company (NYSE:PFGC).

How have hedgies been trading Performance Food Group Company (NYSE:PFGC)?

At Q1’s end, a total of 29 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -6% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards PFGC over the last 18 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, Eminence Capital held the most valuable stake in Performance Food Group Company (NYSE:PFGC), which was worth $36.3 million at the end of the third quarter. On the second spot was Interval Partners which amassed $31.3 million worth of shares. GLG Partners, Millennium Management, and Maplelane Capital 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 Interval Partners allocated the biggest weight to Performance Food Group Company (NYSE:PFGC), around 2.41% of its 13F portfolio. Marathon Partners is also relatively very bullish on the stock, earmarking 1.36 percent of its 13F equity portfolio to PFGC.

Seeing as Performance Food Group Company (NYSE:PFGC) has faced falling interest from hedge fund managers, it’s safe to say that there exists a select few fund managers that decided to sell off their entire stakes heading into Q4. At the top of the heap, Andrew Immerman and Jeremy Schiffman’s Palestra Capital Management dropped the biggest stake of the 750 funds monitored by Insider Monkey, valued at about $104.2 million in stock. Clint Carlson’s fund, Carlson Capital, also dumped its stock, about $19.1 million worth. These moves are intriguing to say the least, as total hedge fund interest fell by 2 funds heading into Q4.

Let’s now review hedge fund activity in other stocks similar to Performance Food Group Company (NYSE:PFGC). These stocks are Harley-Davidson, Inc. (NYSE:HOG), Carter’s, Inc. (NYSE:CRI), The Descartes Systems Group Inc (NASDAQ:DSGX), and NeoGenomics, Inc. (NASDAQ:NEO). All of these stocks’ market caps are similar to PFGC’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
HOG 17 88189 -2
CRI 23 149581 2
DSGX 10 103626 -2
NEO 11 51026 -1
Average 15.25 98106 -0.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 15.25 hedge funds with bullish positions and the average amount invested in these stocks was $98 million. That figure was $190 million in PFGC’s case. Carter’s, Inc. (NYSE:CRI) is the most popular stock in this table. On the other hand The Descartes Systems Group Inc (NASDAQ:DSGX) is the least popular one with only 10 bullish hedge fund positions. Compared to these stocks Performance Food Group Company (NYSE:PFGC) is more popular among hedge funds. 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 12.3% in 2020 through June 30th and still beat the market by 15.5 percentage points. Unfortunately PFGC wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on PFGC were disappointed as the stock returned 17.9% during the second quarter 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.

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