You probably know from experience that there is not as much information on small-cap companies as there is on large companies. Of course, this makes it really hard and difficult for individual investors to make proper and accurate analysis of certain small-cap companies. However, well-known and successful hedge fund investors like Carl Icahn and George Soros hold the necessary resources and abilities to conduct an extensive stock analysis on small-cap stocks, which enable them to make millions of dollars by identifying potential winners within the small-cap galaxy of stocks. This represents the main reason why Insider Monkey takes notice of the hedge fund activity in these overlooked stocks.
Is Permian Basin Royalty Trust (NYSE:PBT) undervalued? Hedge funds are indeed buying. The number of bullish hedge fund investments swelled by 2 in recent months. There were 10 hedge funds in our database with PBT holdings at the end of the third quarter. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Syros Pharmaceuticals Inc (NASDAQ:SYRS), Seadrill Partners LLC (NYSE:SDLP), and American Software, Inc. (NASDAQ:AMSWA) to gather more data points.
At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.
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With all of this in mind, let’s take a glance at the latest action surrounding Permian Basin Royalty Trust (NYSE:PBT).
What does the smart money think about Permian Basin Royalty Trust (NYSE:PBT)?
At Q3’s end, a total of 10 of the hedge funds tracked by Insider Monkey held long positions in this stock, a jump of 25% from one quarter earlier. By comparison, 7 hedge funds held shares or bullish call options in PBT heading into this year. With hedgies’ positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were increasing their holdings considerably (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Chuck Royce of Royce & Associates holds the number one position in Permian Basin Royalty Trust (NYSE:PBT). According to regulatory filings, the fund has an $8.4 million position in the stock. On Royce & Associates’s heels is Murray Stahl of Horizon Asset Management, with a $2.6 million position. Other members of the smart money that hold long positions encompass Russell Lucas’ Lucas Capital Management, Paul J. Isaac’s Arbiter Partners Capital Management and Jim Simons’ Renaissance Technologies which is one of the largest hedge funds in the world. We should note that Arbiter Partners Capital Management is among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.
As industrywide interest jumped, specific money managers have been driving this bullishness. Russell Hawkins of Hawkins Capital initiated the largest position in Permian Basin Royalty Trust (NYSE:PBT). The fund reportedly had $0.2 million invested in the company at the end of the quarter. Israel Englander’s Millennium Management also initiated a $0.1 million position during the quarter.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Permian Basin Royalty Trust (NYSE:PBT) but similarly valued. These stocks are Syros Pharmaceuticals Inc (NASDAQ:SYRS), Seadrill Partners LLC (NYSE:SDLP), American Software, Inc. (NASDAQ:AMSWA), and Enova International Inc (NYSE:ENVA). All of these stocks’ market caps resemble PBT’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| SYRS | 7 | 49907 | 1 |
| SDLP | 7 | 1670 | 0 |
| AMSWA | 5 | 23513 | 1 |
| ENVA | 21 | 74736 | 3 |
As you can see these stocks had an average of 10 hedge funds with bullish positions and the average amount invested in these stocks was $37 million. That figure was $16 million in PBT’s case. Enova International Inc (NYSE:ENVA) is the most popular stock in this table. On the other hand American Software, Inc. (NASDAQ:AMSWA) is the least popular one with only 5 bullish hedge fund positions. Permian Basin Royalty Trust (NYSE:PBT) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard ENVA might be a better candidate to consider taking a long position in.
Disclosure: None
