“Since 2006, value stocks (IVE vs IVW) have underperformed 11 of the 13 calendar years and when they beat growth, it wasn’t by much. Cumulatively, through this week, it has been a 122% differential (up 52% for value vs up 174% for growth). This appears to be the longest and most severe drought for value investors since data collection began. It will go our way eventually as there are too many people paying far too much for today’s darlings, both public and private. Further, the ten-year yield of 2.5% (pre-tax) isn’t attractive nor is real estate. We believe the value part of the global equity market is the only place to earn solid risk adjusted returns and we believe those returns will be higher than normal,” said Vilas Fund in its Q1 investor letter. We aren’t sure whether value stocks outperform growth, but we follow hedge fund investor letters to understand where the markets and stocks might be going. That’s why we believe it would be worthwhile to take a look at the hedge fund sentiment on Personalis, Inc. (NASDAQ:PSNL) in order to identify whether reputable and successful top money managers continue to believe in its potential.
Is Personalis, Inc. (NASDAQ:PSNL) the right pick for your portfolio? Prominent investors are selling. The number of bullish hedge fund bets decreased by 6 in recent months. Our calculations also showed that PSNL 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.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s flagship best performing hedge funds strategy returned 91% since May 2014 and outperformed the Russell 2000 ETFs by nearly 40 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Samuel Isaly of OrbiMed Advisors
We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. 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 even check out this option genius’ weekly trade ideas. This December we recommended Adams Energy based on an under-the-radar fund manager’s investor letter and the stock gained 20 percent. We’re going to take a look at the fresh hedge fund action surrounding Personalis, Inc. (NASDAQ:PSNL).
Hedge fund activity in Personalis, Inc. (NASDAQ:PSNL)
At Q3’s end, a total of 11 of the hedge funds tracked by Insider Monkey were long this stock, a change of -35% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards PSNL over the last 17 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, OrbiMed Advisors held the most valuable stake in Personalis, Inc. (NASDAQ:PSNL), which was worth $7.1 million at the end of the third quarter. On the second spot was Laurion Capital Management which amassed $4.6 million worth of shares. Healthcor Management, Zimmer Partners, and Citadel Investment Group were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Prosight Capital allocated the biggest weight to Personalis, Inc. (NASDAQ:PSNL), around 0.94% of its 13F portfolio. Healthcor Management is also relatively very bullish on the stock, dishing out 0.16 percent of its 13F equity portfolio to PSNL.
Because Personalis, Inc. (NASDAQ:PSNL) has faced bearish sentiment from the smart money, we can see that there was a specific group of hedgies that decided to sell off their entire stakes heading into Q4. Intriguingly, Jeremy Green’s Redmile Group said goodbye to the largest position of all the hedgies followed by Insider Monkey, valued at an estimated $10.9 million in stock. Richard Driehaus’s fund, Driehaus Capital, also dropped its stock, about $8.4 million worth. These transactions are interesting, as total hedge fund interest dropped by 6 funds heading into Q4.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Personalis, Inc. (NASDAQ:PSNL) but similarly valued. These stocks are Boston Omaha Corporation (NASDAQ:BOMN), BBX Capital Corporation (NYSE:BBX), Avianca Holdings SA (NYSE:AVH), and DryShips Inc. (NASDAQ:DRYS). All of these stocks’ market caps resemble PSNL’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| BOMN | 7 | 205119 | 2 |
| BBX | 14 | 29039 | -1 |
| AVH | 3 | 6791 | -1 |
| DRYS | 7 | 19825 | 5 |
| Average | 7.75 | 65194 | 1.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 7.75 hedge funds with bullish positions and the average amount invested in these stocks was $65 million. That figure was $25 million in PSNL’s case. BBX Capital Corporation (NYSE:BBX) is the most popular stock in this table. On the other hand Avianca Holdings SA (NYSE:AVH) is the least popular one with only 3 bullish hedge fund positions. Personalis, Inc. (NASDAQ:PSNL) is not the most popular stock in this group but hedge fund interest is still above average. 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 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. Unfortunately PSNL wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on PSNL were disappointed as the stock returned -39.4% during the fourth quarter (through the end of November) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
Disclosure: None. This article was originally published at Insider Monkey.
