We at Insider Monkey have gone over 821 13F filings that hedge funds and prominent investors are required to file by the SEC The 13F filings show the funds’ and investors’ portfolio positions as of March 31st, near the height of the coronavirus market crash. In this article, we look at what those funds think of Palomar Holdings, Inc. (NASDAQ:PLMR) based on that data.
Is Palomar Holdings, Inc. (NASDAQ:PLMR) a buy right now? Money managers are selling. The number of long hedge fund positions shrunk by 1 in recent months. Our calculations also showed that PLMR isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks). PLMR was in 7 hedge funds’ portfolios at the end of the first quarter of 2020. There were 8 hedge funds in our database with PLMR positions at the end of the previous quarter.
Video: Watch our video about the top 5 most popular hedge fund stocks.
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’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 58 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
Donald Sussman of Paloma Partners
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out stocks recommended/scorned by legendary Bill Miller. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind we’re going to take a gander at the latest hedge fund action encompassing Palomar Holdings, Inc. (NASDAQ:PLMR).
How are hedge funds trading Palomar Holdings, Inc. (NASDAQ:PLMR)?
At Q1’s end, a total of 7 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -13% from the fourth quarter of 2019. Below, you can check out the change in hedge fund sentiment towards PLMR over the last 18 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.
More specifically, Driehaus Capital was the largest shareholder of Palomar Holdings, Inc. (NASDAQ:PLMR), with a stake worth $33 million reported as of the end of September. Trailing Driehaus Capital was Millennium Management, which amassed a stake valued at $6.5 million. Brant Point Investment Management, D E Shaw, and PDT Partners 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 Driehaus Capital allocated the biggest weight to Palomar Holdings, Inc. (NASDAQ:PLMR), around 1.1% of its 13F portfolio. Brant Point Investment Management is also relatively very bullish on the stock, designating 0.32 percent of its 13F equity portfolio to PLMR.
Because Palomar Holdings, Inc. (NASDAQ:PLMR) has witnessed declining sentiment from hedge fund managers, logic holds that there exists a select few hedgies who were dropping their entire stakes in the first quarter. Interestingly, Steve Cohen’s Point72 Asset Management sold off the biggest stake of the “upper crust” of funds tracked by Insider Monkey, totaling close to $1 million in stock. Paul Marshall and Ian Wace’s fund, Marshall Wace LLP, also said goodbye to its stock, about $0.5 million worth. These moves are interesting, as total hedge fund interest dropped by 1 funds in the first quarter.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Palomar Holdings, Inc. (NASDAQ:PLMR) but similarly valued. We will take a look at Vector Group Ltd (NYSE:VGR), Hostess Brands, Inc. (NASDAQ:TWNK), Zymeworks Inc. (NYSE:ZYME), and Gibraltar Industries Inc (NASDAQ:ROCK). This group of stocks’ market values are similar to PLMR’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| VGR | 16 | 123143 | -1 |
| TWNK | 30 | 165605 | -7 |
| ZYME | 27 | 654899 | 3 |
| ROCK | 19 | 103608 | -4 |
| Average | 23 | 261814 | -2.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 23 hedge funds with bullish positions and the average amount invested in these stocks was $262 million. That figure was $47 million in PLMR’s case. Hostess Brands, Inc. (NASDAQ:TWNK) is the most popular stock in this table. On the other hand Vector Group Ltd (NYSE:VGR) is the least popular one with only 16 bullish hedge fund positions. Compared to these stocks Palomar Holdings, Inc. (NASDAQ:PLMR) is even less popular than VGR. Hedge funds clearly dropped the ball on PLMR as the stock delivered strong returns, though hedge funds’ consensus picks still generated respectable returns. 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 13.9% in 2020 through June 10th and still beat the market by 14.2 percentage points. A small number of hedge funds were also right about betting on PLMR as the stock returned 35.5% so far in the second quarter and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.
