How do you pick the next stock to invest in? One way would be to spend days of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don’t always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding Preformed Line Products Company (NASDAQ:PLPC).
Preformed Line Products Company (NASDAQ:PLPC) shares haven’t seen a lot of action during the third quarter. Overall, hedge fund sentiment was unchanged. The stock was in 5 hedge funds’ portfolios at the end of September. At the end of this article we will also compare PLPC to other stocks including Central Valley Community Bancorp (NASDAQ:CVCY), BayCom Corp (NASDAQ:BCML), and SEACOR Marine Holdings Inc. (NYSE:SMHI) to get a better sense of its popularity.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Today there are a large number of formulas investors can use to size up their stock investments. Two of the most innovative formulas are hedge fund and insider trading signals. We have shown that, historically, those who follow the best picks of the best money managers can outclass the market by a healthy amount (see the details here).
Ken Griffin of Citadel Investment Group
We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We even check out this option genius’ weekly trade ideas. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager’s investor letter and the stock already gained 20 percent. Keeping this in mind we’re going to take a gander at the fresh hedge fund action surrounding Preformed Line Products Company (NASDAQ:PLPC).
How are hedge funds trading Preformed Line Products Company (NASDAQ:PLPC)?
Heading into the fourth quarter of 2019, a total of 5 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the previous quarter. By comparison, 7 hedge funds held shares or bullish call options in PLPC a year ago. With the smart money’s positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were upping their holdings considerably (or already accumulated large positions).
More specifically, Royce & Associates was the largest shareholder of Preformed Line Products Company (NASDAQ:PLPC), with a stake worth $25.2 million reported as of the end of September. Trailing Royce & Associates was Renaissance Technologies, which amassed a stake valued at $4.1 million. Arrowstreet Capital, Citadel Investment Group, and Springbok 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 Royce & Associates allocated the biggest weight to Preformed Line Products Company (NASDAQ:PLPC), around 0.23% of its 13F portfolio. Renaissance Technologies is also relatively very bullish on the stock, setting aside 0.0035 percent of its 13F equity portfolio to PLPC.
Earlier we told you that the aggregate hedge fund interest in the stock was unchanged and we view this as a negative development. Even though there weren’t any hedge funds dumping their holdings during the third quarter, there weren’t any hedge funds initiating brand new positions. This indicates that hedge funds, at the very best, perceive this stock as dead money and they haven’t identified any viable catalysts that can attract investor attention.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Preformed Line Products Company (NASDAQ:PLPC) but similarly valued. These stocks are Central Valley Community Bancorp (NASDAQ:CVCY), BayCom Corp (NASDAQ:BCML), SEACOR Marine Holdings Inc. (NYSE:SMHI), and Rayonier Advanced Materials Inc (NYSE:RYAM). All of these stocks’ market caps match PLPC’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CVCY | 3 | 16452 | 0 |
| BCML | 5 | 25945 | 1 |
| SMHI | 6 | 27404 | -1 |
| RYAM | 11 | 30864 | -12 |
| Average | 6.25 | 25166 | -3 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 6.25 hedge funds with bullish positions and the average amount invested in these stocks was $25 million. That figure was $30 million in PLPC’s case. Rayonier Advanced Materials Inc (NYSE:RYAM) is the most popular stock in this table. On the other hand Central Valley Community Bancorp (NASDAQ:CVCY) is the least popular one with only 3 bullish hedge fund positions. Preformed Line Products Company (NASDAQ:PLPC) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. A small number of hedge funds were also right about betting on PLPC as the stock returned 31.7% during the first two months of Q4 and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.
