Hedge Funds Are Cashing Out Of Primo Water Corporation (PRMW)

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 Primo Water Corporation (NYSE:PRMW).

Primo Water Corporation (NYSE:PRMW) investors should pay attention to a decrease in hedge fund sentiment of late. Primo Water Corporation (NYSE:PRMW) was in 24 hedge funds’ portfolios at the end of the second quarter of 2021. The all time high for this statistic is 36. There were 32 hedge funds in our database with PRMW holdings at the end of March. Our calculations also showed that PRMW isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).

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. Hedge funds have more than $3.5 trillion in assets under management, so you can’t expect their entire portfolios to beat the market by large margins. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 79 percentage points since March 2017 (see the details here). So you can still find a lot of gems by following hedge funds’ moves today.

Steven Cohen of Point72 Asset Management

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. Keeping this in mind we’re going to analyze the key hedge fund action regarding Primo Water Corporation (NYSE:PRMW).

Do Hedge Funds Think PRMW Is A Good Stock To Buy Now?

Heading into the third quarter of 2021, a total of 24 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -25% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards PRMW over the last 24 quarters. With hedgies’ sentiment swirling, there exists an “upper tier” of noteworthy hedge fund managers who were increasing their holdings considerably (or already accumulated large positions).

Of the funds tracked by Insider Monkey, Seth Rosen’s Nitorum Capital has the biggest position in Primo Water Corporation (NYSE:PRMW), worth close to $143.9 million, amounting to 6.6% of its total 13F portfolio. The second largest stake is held by Praesidium Investment Management Company, led by Kevin Oram and Peter Uddo, holding a $118.9 million position; the fund has 6.3% of its 13F portfolio invested in the stock. Some other members of the smart money that hold long positions contain David S. Winter and David J. Millstone’s 40 North Management, Claus Moller’s P2 Capital Partners and David Brown’s Hawk Ridge Management. In terms of the portfolio weights assigned to each position StackLine Partners allocated the biggest weight to Primo Water Corporation (NYSE:PRMW), around 12.05% of its 13F portfolio. P2 Capital Partners is also relatively very bullish on the stock, designating 7.79 percent of its 13F equity portfolio to PRMW.

Seeing as Primo Water Corporation (NYSE:PRMW) has experienced a decline in interest from the smart money, we can see that there is a sect of money managers that decided to sell off their entire stakes heading into Q3. Interestingly, Jack Woodruff’s Candlestick Capital Management dropped the largest position of the “upper crust” of funds tracked by Insider Monkey, worth about $24 million in stock, and John A. Levin’s Levin Capital Strategies was right behind this move, as the fund cut about $7.6 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest dropped by 8 funds heading into Q3.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Primo Water Corporation (NYSE:PRMW) but similarly valued. We will take a look at TransAlta Corporation (NYSE:TAC), MGE Energy, Inc. (NASDAQ:MGEE), Canadian Solar Inc. (NASDAQ:CSIQ), Sleep Number Corporation (NASDAQ:SNBR), Veracyte Inc (NASDAQ:VCYT), Rush Street Interactive, Inc. (NYSE:RSI), and Sunstone Hotel Investors Inc (NYSE:SHO). This group of stocks’ market values match PRMW’s market value.

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As you can see these stocks had an average of 15.9 hedge funds with bullish positions and the average amount invested in these stocks was $146 million. That figure was $687 million in PRMW’s case. Sleep Number Corporation (NASDAQ:SNBR) is the most popular stock in this table. On the other hand MGE Energy, Inc. (NASDAQ:MGEE) is the least popular one with only 5 bullish hedge fund positions. Primo Water Corporation (NYSE:PRMW) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for PRMW is 64.5. 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. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. 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 24% in 2021 through October 22nd and beat the market again by 1.6 percentage points. Unfortunately PRMW wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on PRMW were disappointed as the stock returned -4.4% since the end of June (through 10/22) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.

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