Here is What Hedge Funds Think About Parsley Energy Inc (PE)

Reputable billionaire investors such as Jim Simons, Cliff Asness and David Tepper generate exorbitant profits for their wealthy accredited investors (a minimum of $1 million in investable assets would be required to invest in a hedge fund and most successful hedge funds won’t accept your savings unless you commit at least $5 million) by pinpointing winning small-cap stocks. There is little or no publicly-available information at all on some of these small companies, which makes it hard for an individual investor to pin down a winner within the small-cap space. However, hedge funds and other big asset managers can do the due diligence and analysis for you instead, thanks to their highly-skilled research teams and vast resources to conduct an appropriate evaluation process. Looking for potential winners within the small-cap galaxy of stocks? We believe following the smart money is a good starting point.

Parsley Energy Inc (NYSE:PE) was in 36 hedge funds’ portfolios at the end of December. PE shareholders have witnessed a decrease in hedge fund interest of late. There were 44 hedge funds in our database with PE positions at the end of the previous quarter. Our calculations also showed that PE isn’t among the 30 most popular stocks among hedge funds.

If you’d ask most stock holders, hedge funds are perceived as slow, old financial vehicles of the past. While there are more than 8000 funds in operation at the moment, We hone in on the crème de la crème of this club, around 750 funds. These investment experts preside over most of the smart money’s total asset base, and by tailing their inimitable investments, Insider Monkey has discovered numerous investment strategies that have historically outrun the S&P 500 index. Insider Monkey’s flagship hedge fund strategy outstripped the S&P 500 index by nearly 5 percentage points per annum since its inception in May 2014 through early November 2018. We were able to generate large returns even by identifying short candidates. Our portfolio of short stocks lost 27.5% since February 2017 (through March 12th) even though the market was up nearly 25% during the same period. We just shared a list of 6 short targets in our latest quarterly update and they are already down an average of 6% in less than a month.

We’re going to analyze the new hedge fund action regarding Parsley Energy Inc (NYSE:PE).

What does the smart money think about Parsley Energy Inc (NYSE:PE)?

At Q4’s end, a total of 36 of the hedge funds tracked by Insider Monkey were long this stock, a change of -18% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards PE over the last 14 quarters. With hedge funds’ positions undergoing their usual ebb and flow, there exists an “upper tier” of noteworthy hedge fund managers who were adding to their stakes meaningfully (or already accumulated large positions).

More specifically, Adage Capital Management was the largest shareholder of Parsley Energy Inc (NYSE:PE), with a stake worth $155.9 million reported as of the end of September. Trailing Adage Capital Management was Renaissance Technologies, which amassed a stake valued at $73.7 million. Luminus Management, Point72 Asset Management, and Zimmer Partners were also very fond of the stock, giving the stock large weights in their portfolios.

Judging by the fact that Parsley Energy Inc (NYSE:PE) has witnessed a decline in interest from the entirety of the hedge funds we track, it’s easy to see that there was a specific group of hedge funds who were dropping their entire stakes by the end of the third quarter. At the top of the heap, Andreas Halvorsen’s Viking Global dropped the largest position of all the hedgies monitored by Insider Monkey, comprising about $486.1 million in stock, and Zach Schreiber’s Point State Capital was right behind this move, as the fund dropped about $137.4 million worth. These moves are important to note, as aggregate hedge fund interest was cut by 8 funds by the end of the third quarter.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Parsley Energy Inc (NYSE:PE) but similarly valued. We will take a look at Farfetch Limited (NYSE:FTCH), Moderna, Inc. (NASDAQ:MRNA), The Trade Desk, Inc. (NASDAQ:TTD), and Reliance Steel & Aluminum Co. (NYSE:RS). This group of stocks’ market valuations resemble PE’s market valuation.

View table here if you experience formatting issues.

As you can see these stocks had an average of 17.75 hedge funds with bullish positions and the average amount invested in these stocks was $233 million. That figure was $663 million in PE’s case. Reliance Steel & Aluminum Co. (NYSE:RS) is the most popular stock in this table. On the other hand The Trade Desk, Inc. (NASDAQ:TTD) is the least popular one with only 16 bullish hedge fund positions. Compared to these stocks Parsley Energy Inc (NYSE:PE) is more popular among hedge funds. Our calculations showed that top 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. Hedge funds were also right about betting on PE as the stock returned 36.2% and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock.

Disclosure: None. This article was originally published at Insider Monkey.