Investing in small cap stocks has historically been a way to outperform the market, as small cap companies typically grow faster on average than the blue chips. That outperformance comes with a price, however, as there are occasional periods of higher volatility. The last 8 months is one of those periods, as the Russell 2000 ETF (IWM) has underperformed the larger S&P 500 ETF (SPY) by nearly 9 percentage points. Given that the funds we track tend to have a disproportionate amount of their portfolios in smaller cap stocks, they have seen some volatility in their portfolios too. Actually their moves are potentially one of the factors that contributed to this volatility. In this article, we use our extensive database of hedge fund holdings to find out what the smart money thinks of Primo Water Corporation (NASDAQ:PRMW).
Is Primo Water Corporation (NASDAQ:PRMW) a buy here? Money managers are in a bearish mood. The number of long hedge fund bets dropped by 1 in recent months. Our calculations also showed that PRMW isn’t among the 30 most popular stocks among hedge funds. PRMW was in 13 hedge funds’ portfolios at the end of the first quarter of 2019. There were 14 hedge funds in our database with PRMW holdings at the end of the previous quarter.
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. 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 market by 40 percentage points since May 2014 through May 30, 2019 (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 30.9% through May 30, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
We’re going to check out the latest hedge fund action regarding Primo Water Corporation (NASDAQ:PRMW).
How have hedgies been trading Primo Water Corporation (NASDAQ:PRMW)?
Heading into the second quarter of 2019, a total of 13 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -7% from the previous quarter. The graph below displays the number of hedge funds with bullish position in PRMW over the last 15 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.
Of the funds tracked by Insider Monkey, Akre Capital Management, managed by Charles Akre, holds the number one position in Primo Water Corporation (NASDAQ:PRMW). Akre Capital Management has a $44.2 million position in the stock, comprising 0.5% of its 13F portfolio. Coming in second is Ted White and Christopher Kiper of Legion Partners Asset Management, with a $41.7 million position; the fund has 11% of its 13F portfolio invested in the stock. Remaining hedge funds and institutional investors with similar optimism consist of Jim Simons’s Renaissance Technologies, Richard Driehaus’s Driehaus Capital and George McCabe’s Portolan Capital Management.
Seeing as Primo Water Corporation (NASDAQ:PRMW) has experienced a decline in interest from the entirety of the hedge funds we track, it’s safe to say that there was a specific group of hedgies who were dropping their positions entirely in the third quarter. It’s worth mentioning that Israel Englander’s Millennium Management dropped the biggest investment of the 700 funds followed by Insider Monkey, totaling about $0.3 million in stock. Ken Griffin’s fund, Citadel Investment Group, also dropped its stock, about $0.2 million worth. These transactions are interesting, as total hedge fund interest dropped by 1 funds in the third quarter.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Primo Water Corporation (NASDAQ:PRMW) but similarly valued. These stocks are Cohu, Inc. (NASDAQ:COHU), Venator Materials PLC (NYSE:VNTR), Tristate Capital Holdings Inc (NASDAQ:TSC), and ProQR Therapeutics NV (NASDAQ:PRQR). This group of stocks’ market caps resemble PRMW’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| COHU | 13 | 38649 | 4 |
| VNTR | 18 | 108111 | 2 |
| TSC | 13 | 53936 | -1 |
| PRQR | 10 | 106417 | -1 |
| Average | 13.5 | 76778 | 1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 13.5 hedge funds with bullish positions and the average amount invested in these stocks was $77 million. That figure was $140 million in PRMW’s case. Venator Materials PLC (NYSE:VNTR) is the most popular stock in this table. On the other hand ProQR Therapeutics NV (NASDAQ:PRQR) is the least popular one with only 10 bullish hedge fund positions. Primo Water Corporation (NASDAQ:PRMW) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and 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 6.2% in Q2 through June 19th and outperformed the S&P 500 ETF (SPY) by nearly 3 percentage points. Unfortunately PRMW wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); PRMW investors were disappointed as the stock returned -18.4% during the same time period 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 13 of these stocks already outperformed the market so far in Q2.
Disclosure: None. This article was originally published at Insider Monkey.
