“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 Pluralsight, Inc. (NASDAQ:PS) in order to identify whether reputable and successful top money managers continue to believe in its potential.
Is Pluralsight, Inc. (NASDAQ:PS) a buy here? Investors who are in the know are getting less optimistic. The number of bullish hedge fund bets were cut by 10 lately. Our calculations also showed that PS isn’t among the 30 most popular stocks among hedge funds (view the video below).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
In today’s marketplace there are a large number of indicators stock market investors employ to grade publicly traded companies. Two of the less known indicators are hedge fund and insider trading sentiment. Our experts have shown that, historically, those who follow the best picks of the top money managers can outpace the S&P 500 by a very impressive margin (see the details here).
Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. We’re going to take a gander at the latest hedge fund action regarding Pluralsight, Inc. (NASDAQ:PS).
What have hedge funds been doing with Pluralsight, Inc. (NASDAQ:PS)?
At Q2’s end, a total of 20 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -33% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in PS over the last 16 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.
The largest stake in Pluralsight, Inc. (NASDAQ:PS) was held by D E Shaw, which reported holding $51.8 million worth of stock at the end of March. It was followed by Citadel Investment Group with a $22.1 million position. Other investors bullish on the company included Two Sigma Advisors, Diker Management, and Renaissance Technologies.
Judging by the fact that Pluralsight, Inc. (NASDAQ:PS) has experienced declining sentiment from hedge fund managers, it’s safe to say that there was a specific group of fund managers who were dropping their entire stakes last quarter. Intriguingly, Alex Sacerdote’s Whale Rock Capital Management dropped the largest stake of all the hedgies tracked by Insider Monkey, totaling about $64.8 million in stock, and James Crichton’s Hitchwood Capital Management was right behind this move, as the fund cut about $25.4 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest fell by 10 funds last quarter.
Let’s check out hedge fund activity in other stocks similar to Pluralsight, Inc. (NASDAQ:PS). These stocks are Echostar Corporation (NASDAQ:SATS), Landstar System, Inc. (NASDAQ:LSTR), Rexford Industrial Realty Inc (NYSE:REXR), and Spire Inc. (NYSE:SR). This group of stocks’ market valuations resemble PS’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| SATS | 28 | 563065 | -1 |
| LSTR | 22 | 221384 | -1 |
| REXR | 17 | 201790 | -4 |
| SR | 12 | 95947 | -3 |
| Average | 19.75 | 270547 | -2.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 19.75 hedge funds with bullish positions and the average amount invested in these stocks was $271 million. That figure was $212 million in PS’s case. Echostar Corporation (NASDAQ:SATS) is the most popular stock in this table. On the other hand Spire Inc. (NYSE:SR) is the least popular one with only 12 bullish hedge fund positions. Pluralsight, Inc. (NASDAQ:PS) 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 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately PS wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on PS were disappointed as the stock returned -44.6% 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 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.
