Is Party City Holdco Inc (PRTY) A Good Stock To Buy?

The elite funds run by legendary investors such as Dan Loeb and David Tepper make hundreds of millions of dollars for themselves and their investors by spending enormous resources doing research on small cap stocks that big investment banks don’t follow. Because of their pay structures, they have strong incentive to do the research necessary to beat the market. That’s why we pay close attention to what they think in small cap stocks. In this article, we take a closer look at Party City Holdco Inc (NYSE:PRTY) from the perspective of those elite funds.

Is Party City Holdco Inc (NYSE:PRTY) a superb stock to buy now? Prominent investors are in a pessimistic mood. The number of long hedge fund bets retreated by 6 in recent months. PRTY was in 12 hedge funds’ portfolios at the end of September. There were 18 hedge funds in our database with PRTY positions at the end of the previous quarter. At the end of this article we will also compare PRTY to other stocks including KLX Inc (NASDAQ:KLXI), FleetMatics Group PLC (NYSE:FLTX), and Teekay LNG Partners L.P. (NYSE:TGP) to get a better sense of its popularity.

Now, we’re going to take a gander at the key action surrounding Party City Holdco Inc (NYSE:PRTY).

How have hedgies been trading Party City Holdco Inc (NYSE:PRTY)?

At Q3’s end, a total of 12 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -33% from one quarter earlier. With hedgies’ sentiment swirling, there exists a few notable hedge fund managers who were increasing their stakes meaningfully (or already accumulated large positions).

Of the funds tracked by Insider Monkey, Rob Citrone’s Discovery Capital Management has the biggest position in Party City Holdco Inc (NYSE:PRTY), worth close to $18.5 million, amounting to 0.2% of its total 13F portfolio. The second most bullish fund manager is Sharlyn C. Heslam of Stockbridge Partners, with a $14.3 million position; 0.8% of its 13F portfolio is allocated to the company. Some other members of the smart money that hold long positions include Ken Griffin’s Citadel Investment Group, Lee Munder’s Lee Munder Capital Group and Bart Baum’s Ionic Capital Management.

Due to the fact that Party City Holdco Inc (NYSE:PRTY) has witnessed a declination in interest from hedge fund managers, it’s easy to see that there is a sect of hedge funds that decided to sell off their entire stakes in the third quarter. Intriguingly, James Crichton’s Hitchwood Capital Management cut the largest position of the “upper crust” of funds watched by Insider Monkey, totaling about $30.4 million in stock, and Neil Chriss’ Hutchin Hill Capital was right behind this move, as the fund dropped about $20.3 million worth. These bearish behaviors are interesting, as total hedge fund interest dropped by 6 funds in the third quarter.

Let’s go over hedge fund activity in other stocks similar to Party City Holdco Inc (NYSE:PRTY). These stocks are KLX Inc (NASDAQ:KLXI), FleetMatics Group PLC (NYSE:FLTX), Teekay LNG Partners L.P. (NYSE:TGP), and InterXion Holding NV (NYSE:INXN). All of these stocks’ market caps are closest to PRTY’s market cap.

As you can see these stocks had an average of 21.25 hedge funds with bullish positions and the average amount invested in these stocks was $414 million. That figure was $83 million in PRTY’s case. KLX Inc (NASDAQ:KLXI) is the most popular stock in this table. On the other hand Teekay LNG Partners L.P. (NYSE:TGP) is the least popular one with only 7 bullish hedge fund positions. Party City Holdco Inc (NYSE:PRTY) 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. In this regard KLXI might be a better candidate to consider a long position.