It has been a fantastic year for equity investors as Donald Trump pressured Federal Reserve to reduce interest rates and finalized the first leg of a trade deal with China. If you were a passive index fund investor, you had seen gains of 31% in your equity portfolio in 2019. However, if you were an active investor putting your money into hedge funds’ favorite stocks, you had seen gains of more than 41%. In this article we are going to take a look at how hedge funds feel about a stock like Planet Fitness Inc (NYSE:PLNT) and compare its performance against hedge funds’ favorite stocks.
Planet Fitness Inc (NYSE:PLNT) investors should be aware of a decrease in enthusiasm from smart money lately. PLNT was in 34 hedge funds’ portfolios at the end of September. There were 38 hedge funds in our database with PLNT holdings at the end of the previous quarter. Our calculations also showed that PLNT isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video at the end of this article for Q2 rankings).
If you’d ask most stock holders, hedge funds are viewed as underperforming, outdated investment tools of years past. While there are greater than 8000 funds in operation today, Our researchers choose to focus on the leaders of this club, around 750 funds. These money managers handle the majority of all hedge funds’ total capital, and by following their top equity investments, Insider Monkey has determined numerous investment strategies that have historically beaten Mr. Market. Insider Monkey’s flagship short hedge fund strategy outperformed the S&P 500 short ETFs by around 20 percentage points per year since its inception in May 2014. Our portfolio of short stocks lost 27.8% since February 2017 (through November 21st) even though the market was up more than 39% during the same period. We just shared a list of 7 short targets in our latest quarterly update .
Israel Englander of Millennium Management
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. With all of this in mind let’s take a look at the new hedge fund action encompassing Planet Fitness Inc (NYSE:PLNT).
How have hedgies been trading Planet Fitness Inc (NYSE:PLNT)?
Heading into the fourth quarter of 2019, a total of 34 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -11% from the second quarter of 2019. By comparison, 32 hedge funds held shares or bullish call options in PLNT a year ago. With the smart money’s capital changing hands, there exists a select group of key hedge fund managers who were adding to their holdings significantly (or already accumulated large positions).
The largest stake in Planet Fitness Inc (NYSE:PLNT) was held by Pelham Capital, which reported holding $92.8 million worth of stock at the end of September. It was followed by Two Sigma Advisors with a $63.4 million position. Other investors bullish on the company included Millennium Management, Arrowstreet Capital, and D E Shaw. In terms of the portfolio weights assigned to each position Pelham Capital allocated the biggest weight to Planet Fitness Inc (NYSE:PLNT), around 10.42% of its 13F portfolio. Emerson Point Capital is also relatively very bullish on the stock, dishing out 8 percent of its 13F equity portfolio to PLNT.
Since Planet Fitness Inc (NYSE:PLNT) has witnessed bearish sentiment from the aggregate hedge fund industry, it’s easy to see that there lies a certain “tier” of fund managers that decided to sell off their entire stakes heading into Q4. Interestingly, James Parsons’s Junto Capital Management dropped the biggest stake of the 750 funds followed by Insider Monkey, worth about $39.2 million in stock, and James Crichton’s Hitchwood Capital Management was right behind this move, as the fund dumped about $32.6 million worth. These transactions are important to note, as total hedge fund interest was cut by 4 funds heading into Q4.
Let’s go over hedge fund activity in other stocks similar to Planet Fitness Inc (NYSE:PLNT). We will take a look at Gerdau SA (NYSE:GGB), Huntsman Corporation (NYSE:HUN), SmileDirectClub, Inc. (NASDAQ:SDC), and Primerica, Inc. (NYSE:PRI). This group of stocks’ market values resemble PLNT’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| GGB | 9 | 95401 | 2 |
| HUN | 28 | 394601 | -2 |
| SDC | 28 | 287514 | 28 |
| PRI | 23 | 340762 | -3 |
| Average | 22 | 279570 | 6.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 22 hedge funds with bullish positions and the average amount invested in these stocks was $280 million. That figure was $525 million in PLNT’s case. Huntsman Corporation (NYSE:HUN) is the most popular stock in this table. On the other hand Gerdau SA (NYSE:GGB) is the least popular one with only 9 bullish hedge fund positions. Compared to these stocks Planet Fitness Inc (NYSE:PLNT) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.1% in 2019 through December 23rd and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. Hedge funds were also right about betting on PLNT, though not to the same extent, as the stock returned 38.3% during the same period and outperformed the market as well.
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.
