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 Petmed Express Inc (NASDAQ:PETS).
Is Petmed Express Inc (NASDAQ:PETS) a buy here? The best stock pickers are in a pessimistic mood. The number of long hedge fund bets decreased by 4 recently. Our calculations also showed that PETS 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.
If you’d ask most traders, hedge funds are seen as slow, old investment vehicles of years past. While there are over 8000 funds trading at the moment, We hone in on the top tier of this club, around 750 funds. These hedge fund managers orchestrate bulk of all hedge funds’ total capital, and by tailing their unrivaled stock picks, Insider Monkey has found several investment strategies that have historically exceeded Mr. Market. Insider Monkey’s flagship short hedge fund strategy outperformed the S&P 500 short ETFs by around 20 percentage points per year since its inception in May 2014. Our portfolio of short stocks lost 27.8% since February 2017 (through November 21st) even though the market was up more than 39% during the same period. We just shared a list of 7 short targets in our latest quarterly update .
Jim Simons of Renaissance Technologies
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. We’re going to check out the recent hedge fund action encompassing Petmed Express Inc (NASDAQ:PETS).
How are hedge funds trading Petmed Express Inc (NASDAQ:PETS)?
At the end of the third quarter, a total of 13 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -24% from the second quarter of 2019. Below, you can check out the change in hedge fund sentiment towards PETS over the last 17 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Petmed Express Inc (NASDAQ:PETS) was held by Renaissance Technologies, which reported holding $29.2 million worth of stock at the end of September. It was followed by GLG Partners with a $9.8 million position. Other investors bullish on the company included Newtyn Management, Millennium Management, and Winton Capital Management. In terms of the portfolio weights assigned to each position Newtyn Management allocated the biggest weight to Petmed Express Inc (NASDAQ:PETS), around 0.89% of its 13F portfolio. Polaris Capital Management is also relatively very bullish on the stock, earmarking 0.1 percent of its 13F equity portfolio to PETS.
Because Petmed Express Inc (NASDAQ:PETS) has witnessed bearish sentiment from the aggregate hedge fund industry, it’s easy to see that there were a few hedgies that slashed their entire stakes heading into Q4. Intriguingly, Matthew Hulsizer’s PEAK6 Capital Management said goodbye to the largest investment of the 750 funds followed by Insider Monkey, worth about $0.8 million in stock. Joel Greenblatt’s fund, Gotham Asset Management, also said goodbye to its stock, about $0.5 million worth. These moves are important to note, as total hedge fund interest fell by 4 funds heading into Q4.
Let’s also examine hedge fund activity in other stocks similar to Petmed Express Inc (NASDAQ:PETS). We will take a look at PlayAGS, Inc. (NYSE:AGS), Spirit MTA REIT (NYSE:SMTA), Majesco (NYSE:MJCO), and Fidus Investment Corp (NASDAQ:FDUS). This group of stocks’ market values are closest to PETS’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| AGS | 16 | 46231 | 4 |
| SMTA | 17 | 114467 | -2 |
| MJCO | 2 | 241 | -1 |
| FDUS | 4 | 10240 | -1 |
| Average | 9.75 | 42795 | 0 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 9.75 hedge funds with bullish positions and the average amount invested in these stocks was $43 million. That figure was $66 million in PETS’s case. Spirit MTA REIT (NYSE:SMTA) is the most popular stock in this table. On the other hand Majesco (NYSE:MJCO) is the least popular one with only 2 bullish hedge fund positions. Petmed Express Inc (NASDAQ:PETS) is not the most popular stock in this group but hedge fund interest is still above 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. Hedge funds were also right about betting on PETS as the stock returned 28.2% during the fourth quarter (through the end of November) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.
