Last year we predicted the arrival of the first US recession since 2009 and we told in advance that the market will decline by at least 20% in (Recession is Imminent: We Need A Travel Ban NOW). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards PagSeguro Digital Ltd. (NYSE:PAGS).
PagSeguro Digital Ltd. (NYSE:PAGS) investors should be aware of an increase in activity from the world’s largest hedge funds in recent months. PagSeguro Digital Ltd. (NYSE:PAGS) was in 33 hedge funds’ portfolios at the end of March. The all time high for this statistic is 48. There were 25 hedge funds in our database with PAGS holdings at the end of December. Our calculations also showed that PAGS isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).
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 115 percentage points since March 2017 (see the details here). That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Robert Pohly of Samlyn Capital
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. With all of this in mind we’re going to take a look at the recent hedge fund action surrounding PagSeguro Digital Ltd. (NYSE:PAGS).
Do Hedge Funds Think PAGS Is A Good Stock To Buy Now?
At the end of the first quarter, a total of 33 of the hedge funds tracked by Insider Monkey were long this stock, a change of 32% from the fourth quarter of 2020. The graph below displays the number of hedge funds with bullish position in PAGS over the last 23 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Sylebra Capital Management, managed by Daniel Patrick Gibson, holds the biggest position in PagSeguro Digital Ltd. (NYSE:PAGS). Sylebra Capital Management has a $452.4 million position in the stock, comprising 11.7% of its 13F portfolio. The second largest stake is held by Melvin Capital Management, led by Gabriel Plotkin, holding a $287.1 million position; the fund has 1.6% of its 13F portfolio invested in the stock. Remaining hedge funds and institutional investors that are bullish encompass Robert Pohly’s Samlyn Capital, Steve Cohen’s Point72 Asset Management and Gabriel Plotkin’s Melvin Capital Management. In terms of the portfolio weights assigned to each position Tekne Capital Management allocated the biggest weight to PagSeguro Digital Ltd. (NYSE:PAGS), around 20.93% of its 13F portfolio. Sylebra Capital Management is also relatively very bullish on the stock, dishing out 11.69 percent of its 13F equity portfolio to PAGS.
As one would reasonably expect, key hedge funds have been driving this bullishness. Melvin Capital Management, managed by Gabriel Plotkin, initiated the biggest call position in PagSeguro Digital Ltd. (NYSE:PAGS). Melvin Capital Management had $125 million invested in the company at the end of the quarter. Michael Rockefeller and KarláKroeker’s Woodline Partners also initiated a $41.8 million position during the quarter. The following funds were also among the new PAGS investors: Leon Shaulov’s Maplelane Capital, Leon Shaulov’s Maplelane Capital, and Renaissance Technologies.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as PagSeguro Digital Ltd. (NYSE:PAGS) but similarly valued. We will take a look at Cenovus Energy Inc (NYSE:CVE), VICI Properties Inc. (NYSE:VICI), GDS Holdings Limited (NASDAQ:GDS), Entegris Inc (NASDAQ:ENTG), Eastman Chemical Company (NYSE:EMN), Franklin Resources, Inc. (NYSE:BEN), and Westinghouse Air Brake Technologies Corporation (NYSE:WAB). All of these stocks’ market caps are closest to PAGS’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CVE | 23 | 379693 | 0 |
| VICI | 41 | 875487 | 3 |
| GDS | 40 | 2080333 | 1 |
| ENTG | 23 | 1484733 | -7 |
| EMN | 27 | 162100 | -4 |
| BEN | 31 | 198221 | -2 |
| WAB | 40 | 2481343 | -5 |
| Average | 32.1 | 1094559 | -2 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 32.1 hedge funds with bullish positions and the average amount invested in these stocks was $1095 million. That figure was $1805 million in PAGS’s case. VICI Properties Inc. (NYSE:VICI) is the most popular stock in this table. On the other hand Cenovus Energy Inc (NYSE:CVE) is the least popular one with only 23 bullish hedge fund positions. PagSeguro Digital Ltd. (NYSE:PAGS) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for PAGS is 58.4. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 22.8% in 2021 through July 2nd and still beat the market by 6 percentage points. Hedge funds were also right about betting on PAGS as the stock returned 24.9% since the end of Q1 (through 7/2) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Follow Pagseguro Digital Ltd. (NYSE:PAGS)
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Disclosure: None. This article was originally published at Insider Monkey.
