How do you pick the next stock to invest in? One way would be to spend days of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don’t always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding Petmed Express Inc (NASDAQ:PETS) and determine whether hedge funds had an edge regarding this stock.
Petmed Express Inc (NASDAQ:PETS) investors should be aware of an increase in support from the world’s most elite money managers of late. Petmed Express Inc (NASDAQ:PETS) was in 19 hedge funds’ portfolios at the end of the second quarter of 2020. The all time high for this statistics is 19. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that PETS isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings and see the video for a quick look at the top 5 stocks).
Video: Watch our video about the top 5 most popular hedge fund stocks.
Today there are many metrics stock market investors can use to analyze publicly traded companies. A duo of the best metrics are hedge fund and insider trading sentiment. Our experts have shown that, historically, those who follow the best picks of the elite money managers can outclass their index-focused peers by a healthy amount (see the details here).
David Harding of Winton Capital Management
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we are checking out this junior gold mining stock and we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website to get excerpts of these letters in your inbox. Keeping this in mind let’s view the latest hedge fund action surrounding Petmed Express Inc (NASDAQ:PETS).
How have hedgies been trading Petmed Express Inc (NASDAQ:PETS)?
At the end of the second quarter, a total of 19 of the hedge funds tracked by Insider Monkey were long this stock, a change of 6% from one quarter earlier. On the other hand, there were a total of 17 hedge funds with a bullish position in PETS a year ago. With hedgies’ capital changing hands, there exists an “upper tier” of notable hedge fund managers who were upping their holdings significantly (or already accumulated large positions).
Among these funds, Renaissance Technologies held the most valuable stake in Petmed Express Inc (NASDAQ:PETS), which was worth $57 million at the end of the third quarter. On the second spot was Arrowstreet Capital which amassed $16.3 million worth of shares. GLG Partners, D E Shaw, and Winton Capital Management 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 Winton Capital Management allocated the biggest weight to Petmed Express Inc (NASDAQ:PETS), around 0.21% of its 13F portfolio. Algert Coldiron Investors is also relatively very bullish on the stock, dishing out 0.2 percent of its 13F equity portfolio to PETS.
With a general bullishness amongst the heavyweights, key money managers were breaking ground themselves. Tudor Investment Corp, managed by Paul Tudor Jones, created the largest position in Petmed Express Inc (NASDAQ:PETS). Tudor Investment Corp had $1.6 million invested in the company at the end of the quarter. Greg Eisner’s Engineers Gate Manager also made a $1.3 million investment in the stock during the quarter. The following funds were also among the new PETS investors: Jinghua Yan’s TwinBeech Capital, Bruce Kovner’s Caxton Associates LP, and Peter Algert and Kevin Coldiron’s Algert Coldiron Investors.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Petmed Express Inc (NASDAQ:PETS) but similarly valued. These stocks are Heritage Financial Corporation (NASDAQ:HFWA), Bain Capital Specialty Finance, Inc. (NYSE:BCSF), VBI Vaccines, Inc. (NASDAQ:VBIV), Akero Therapeutics, Inc. (NASDAQ:AKRO), Standex International Corp. (NYSE:SXI), Himax Technologies, Inc. (NASDAQ:HIMX), and Third Point Reinsurance Ltd (NYSE:TPRE). 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 |
|---|---|---|---|
| HFWA | 7 | 12239 | 1 |
| BCSF | 11 | 22631 | 3 |
| VBIV | 10 | 178043 | 6 |
| AKRO | 13 | 116731 | -1 |
| SXI | 12 | 31476 | 3 |
| HIMX | 9 | 51303 | 0 |
| TPRE | 18 | 36720 | 1 |
| Average | 11.4 | 64163 | 1.9 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 11.4 hedge funds with bullish positions and the average amount invested in these stocks was $64 million. That figure was $120 million in PETS’s case. Third Point Reinsurance Ltd (NYSE:TPRE) is the most popular stock in this table. On the other hand Heritage Financial Corporation (NASDAQ:HFWA) is the least popular one with only 7 bullish hedge fund positions. Compared to these stocks Petmed Express Inc (NASDAQ:PETS) is more popular among hedge funds. Our overall hedge fund sentiment score for PETS is 86. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 24.8% in 2020 through the end of September and still beat the market by 19.3 percentage points. Unfortunately PETS wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on PETS were disappointed as the stock returned -10.5% during the third quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
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Disclosure: None. This article was originally published at Insider Monkey.
