Amid an overall bull market, many stocks that smart money investors were collectively bullish on surged through the end of November. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 54% and 51% respectively. Our research shows that most of the stocks that smart money likes historically generate strong risk-adjusted returns. That’s why we weren’t surprised when hedge funds’ top 20 large-cap stock picks generated a return of 37.4% through the end of November and outperformed the broader market benchmark by 9.9 percentage points.This is why following the smart money sentiment is a useful tool at identifying the next stock to invest in.
PC Connection, Inc. (NASDAQ:CNXN) investors should pay attention to an increase in activity from the world’s largest hedge funds in recent months. CNXN was in 11 hedge funds’ portfolios at the end of the third quarter of 2019. There were 8 hedge funds in our database with CNXN positions at the end of the previous quarter. Our calculations also showed that CNXN 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.
Today there are tons of metrics investors employ to size up publicly traded companies. A duo of the less utilized metrics are hedge fund and insider trading interest. We have shown that, historically, those who follow the best picks of the elite investment managers can beat the broader indices by a very impressive margin (see the details here).
Chuck Royce of Royce & Associates
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 review the new hedge fund action encompassing PC Connection, Inc. (NASDAQ:CNXN).
How are hedge funds trading PC Connection, Inc. (NASDAQ:CNXN)?
At Q3’s end, a total of 11 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 38% from one quarter earlier. On the other hand, there were a total of 8 hedge funds with a bullish position in CNXN a year ago. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to Insider Monkey’s hedge fund database, Royce & Associates, managed by Chuck Royce, holds the biggest position in PC Connection, Inc. (NASDAQ:CNXN). Royce & Associates has a $32.8 million position in the stock, comprising 0.3% of its 13F portfolio. Coming in second is AQR Capital Management, led by Cliff Asness, holding a $9.9 million position; less than 0.1%% of its 13F portfolio is allocated to the stock. Some other peers that hold long positions encompass David Harding’s Winton Capital Management, Renaissance Technologies and Israel Englander’s Millennium Management. In terms of the portfolio weights assigned to each position Zebra Capital Management allocated the biggest weight to PC Connection, Inc. (NASDAQ:CNXN), around 0.58% of its 13F portfolio. Royce & Associates is also relatively very bullish on the stock, dishing out 0.3 percent of its 13F equity portfolio to CNXN.
Consequently, specific money managers were leading the bulls’ herd. Citadel Investment Group, managed by Ken Griffin, initiated the most outsized position in PC Connection, Inc. (NASDAQ:CNXN). Citadel Investment Group had $0.9 million invested in the company at the end of the quarter. Josh Goldberg’s G2 Investment Partners Management also initiated a $0.9 million position during the quarter. The other funds with new positions in the stock are David E. Shaw’s D E Shaw and Peter Algert and Kevin Coldiron’s Algert Coldiron Investors.
Let’s go over hedge fund activity in other stocks similar to PC Connection, Inc. (NASDAQ:CNXN). We will take a look at NextGen Healthcare, Inc. (NASDAQ:NXGN), Universal Insurance Holdings, Inc. (NYSE:UVE), Kraton Corporation (NYSE:KRA), and Patrick Industries, Inc. (NASDAQ:PATK). This group of stocks’ market values match CNXN’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| NXGN | 12 | 32218 | -2 |
| UVE | 14 | 62385 | 0 |
| KRA | 15 | 71046 | -2 |
| PATK | 16 | 98893 | 1 |
| Average | 14.25 | 66136 | -0.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 14.25 hedge funds with bullish positions and the average amount invested in these stocks was $66 million. That figure was $50 million in CNXN’s case. Patrick Industries, Inc. (NASDAQ:PATK) is the most popular stock in this table. On the other hand NextGen Healthcare, Inc. (NASDAQ:NXGN) is the least popular one with only 12 bullish hedge fund positions. Compared to these stocks PC Connection, Inc. (NASDAQ:CNXN) is even less popular than NXGN. Hedge funds clearly dropped the ball on CNXN as the stock delivered strong returns, though hedge funds’ consensus picks still generated respectable returns. 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 CNXN as the stock returned 26.8% during the fourth quarter (through the end of November) and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.
