It seems that the masses and most of the financial media hate hedge funds and what they do, but why is this hatred of hedge funds so prominent? At the end of the day, these asset management firms do not gamble the hard-earned money of the people who are on the edge of poverty. Truth be told, most hedge fund managers and other smaller players within this industry are very smart and skilled investors. Of course, they may also make wrong bets in some instances, but no one knows what the future holds and how market participants will react to the bountiful news that floods in each day. The Standard and Poor’s 500 Total Return Index ETFs returned approximately 27.5% in 2019 (through the end of November). Conversely, hedge funds’ top 20 large-cap stock picks generated a return of 37.4% during the same 11-month period, with the majority of these stock picks outperforming the broader market benchmark. Coincidence? It might happen to be so, but it is unlikely. Our research covering the last 18 years indicates that hedge funds’ consensus stock picks generate superior risk-adjusted returns. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like Ping Identity Holding Corp. (NYSE:PING).
Ping Identity Holding Corp. (NYSE:PING) was in 18 hedge funds’ portfolios at the end of the third quarter of 2019. PING investors should pay attention to an increase in enthusiasm from smart money recently. There were 0 hedge funds in our database with PING holdings at the end of the previous quarter. Our calculations also showed that PING 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.
Why do we pay any attention at all to hedge fund sentiment? 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.
Richard Driehaus of Driehaus Capital
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 as a one-way bet based on an under-the-radar fund manager’s investor letter and the stock already gained 20 percent. Keeping this in mind we’re going to check out the recent hedge fund action regarding Ping Identity Holding Corp. (NYSE:PING).
Hedge fund activity in Ping Identity Holding Corp. (NYSE:PING)
Heading into the fourth quarter of 2019, a total of 18 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 18 from the second quarter of 2019. By comparison, 0 hedge funds held shares or bullish call options in PING a year ago. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Alyeska Investment Group held the most valuable stake in Ping Identity Holding Corp. (NYSE:PING), which was worth $11.2 million at the end of the third quarter. On the second spot was Point72 Asset Management which amassed $9.5 million worth of shares. Citadel Investment Group, Driehaus Capital, and Castle Hook Partners 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 SoMa Equity Partners allocated the biggest weight to Ping Identity Holding Corp. (NYSE:PING), around 0.49% of its 13F portfolio. Discovery Capital Management is also relatively very bullish on the stock, dishing out 0.43 percent of its 13F equity portfolio to PING.
As industrywide interest jumped, specific money managers have been driving this bullishness. Alyeska Investment Group, managed by Anand Parekh, created the largest position in Ping Identity Holding Corp. (NYSE:PING). Alyeska Investment Group had $11.2 million invested in the company at the end of the quarter. Steve Cohen’s Point72 Asset Management also made a $9.5 million investment in the stock during the quarter. The other funds with new positions in the stock are Ken Griffin’s Citadel Investment Group, Richard Driehaus’s Driehaus Capital, and Josh Donfeld and David Rogers’s Castle Hook Partners.
Let’s now take a look at hedge fund activity in other stocks similar to Ping Identity Holding Corp. (NYSE:PING). These stocks are Madrigal Pharmaceuticals, Inc. (NASDAQ:MDGL), Osisko Gold Royalties Ltd (NYSE:OR), Covetrus, Inc. (NASDAQ:CVET), and Herc Holdings Inc. (NYSE:HRI). This group of stocks’ market values resemble PING’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| MDGL | 12 | 264363 | 0 |
| OR | 13 | 42365 | 1 |
| CVET | 21 | 140444 | 1 |
| HRI | 26 | 565982 | 4 |
| Average | 18 | 253289 | 1.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 18 hedge funds with bullish positions and the average amount invested in these stocks was $253 million. That figure was $70 million in PING’s case. Herc Holdings Inc. (NYSE:HRI) is the most popular stock in this table. On the other hand Madrigal Pharmaceuticals, Inc. (NASDAQ:MDGL) is the least popular one with only 12 bullish hedge fund positions. Ping Identity Holding Corp. (NYSE:PING) is not the least popular stock in this group but hedge fund interest is still below 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. A small number of hedge funds were also right about betting on PING as the stock returned 30% during the first two months of Q4 and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.