Does Phibro Animal Health Corporation (NASDAQ:PAHC) represent a good buying opportunity at the moment? Let’s quickly check the hedge fund interest towards the company. Hedge fund firms constantly search out bright intellectuals and highly-experienced employees and throw away millions of dollars on satellite photos and other research activities, so it is no wonder why they tend to generate millions in profits each year. It is also true that some hedge fund players fail inconceivably on some occasions, but net net their stock picks have been generating superior risk-adjusted returns on average over the years.
Is Phibro Animal Health Corporation (NASDAQ:PAHC) a safe stock to buy now? Investors who are in the know are betting on the stock. The number of bullish hedge fund positions moved up by 1 lately. Our calculations also showed that PAHC isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (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 27.8% through November 21, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Cliff Asness of AQR Capital Management
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. 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 also rely on the best performing hedge funds‘ buy/sell signals. Let’s take a glance at the recent hedge fund action surrounding Phibro Animal Health Corporation (NASDAQ:PAHC).
What does smart money think about Phibro Animal Health Corporation (NASDAQ:PAHC)?
At Q3’s end, a total of 17 of the hedge funds tracked by Insider Monkey were long this stock, a change of 6% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in PAHC over the last 17 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Of the funds tracked by Insider Monkey, Renaissance Technologies has the most valuable position in Phibro Animal Health Corporation (NASDAQ:PAHC), worth close to $16.9 million, amounting to less than 0.1%% of its total 13F portfolio. Coming in second is Cove Street Capital, managed by Jeffrey Bronchick, which holds a $12.5 million position; 1.7% of its 13F portfolio is allocated to the stock. Other peers with similar optimism contain Israel Englander’s Millennium Management, Noam Gottesman’s GLG Partners and Cliff Asness’s AQR Capital Management. In terms of the portfolio weights assigned to each position Cove Street Capital allocated the biggest weight to Phibro Animal Health Corporation (NASDAQ:PAHC), around 1.75% of its 13F portfolio. Factorial Partners is also relatively very bullish on the stock, setting aside 0.89 percent of its 13F equity portfolio to PAHC.
As aggregate interest increased, specific money managers were breaking ground themselves. PDT Partners, managed by Peter Muller, created the most outsized position in Phibro Animal Health Corporation (NASDAQ:PAHC). PDT Partners had $0.7 million invested in the company at the end of the quarter. Paul Tudor Jones’s Tudor Investment Corp also made a $0.3 million investment in the stock during the quarter.
Let’s go over hedge fund activity in other stocks similar to Phibro Animal Health Corporation (NASDAQ:PAHC). These stocks are FinVolution Group (NYSE:PPDF), ArQule, Inc. (NASDAQ:ARQL), Columbus McKinnon Corporation (NASDAQ:CMCO), and TCG BDC, Inc. (NASDAQ:CGBD). This group of stocks’ market values are closest to PAHC’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| PPDF | 8 | 11005 | 1 |
| ARQL | 24 | 218791 | -1 |
| CMCO | 22 | 63804 | 2 |
| CGBD | 6 | 28979 | -2 |
| Average | 15 | 80645 | 0 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 15 hedge funds with bullish positions and the average amount invested in these stocks was $81 million. That figure was $52 million in PAHC’s case. ArQule, Inc. (NASDAQ:ARQL) is the most popular stock in this table. On the other hand TCG BDC, Inc. (NASDAQ:CGBD) is the least popular one with only 6 bullish hedge fund positions. Phibro Animal Health Corporation (NASDAQ:PAHC) is not the most popular stock in this group but hedge fund interest is still above 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. Hedge funds were also right about betting on PAHC as the stock returned 14.3% during the fourth quarter (through the end of November) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.
