We are still in an overall bull market and many stocks that smart money investors were piling into surged through the end of November. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 54% and 51% respectively. Hedge funds’ top 3 stock picks returned 41.7% this year and beat the S&P 500 ETFs by 14 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like Patrick Industries, Inc. (NASDAQ:PATK).
Is Patrick Industries, Inc. (NASDAQ:PATK) a superb investment right now? Prominent investors are in an optimistic mood. The number of bullish hedge fund bets rose by 1 recently. Our calculations also showed that PATK isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Why do we pay any attention at all to hedge fund sentiment? 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 Russell 2000 ETFs by 40 percentage points since May 2014 (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 27.8% through November 21, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Tim David of Guardian Point Capital
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds‘ buy/sell signals. We’re going to view the fresh hedge fund action surrounding Patrick Industries, Inc. (NASDAQ:PATK).
What have hedge funds been doing with Patrick Industries, Inc. (NASDAQ:PATK)?
Heading into the fourth quarter of 2019, a total of 16 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 7% from the second quarter of 2019. Below, you can check out the change in hedge fund sentiment towards PATK over the last 17 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Tontine Asset Management held the most valuable stake in Patrick Industries, Inc. (NASDAQ:PATK), which was worth $35.1 million at the end of the third quarter. On the second spot was Guardian Point Capital which amassed $12.9 million worth of shares. Royce & Associates, Arrowstreet Capital, and Millennium Management 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 Tontine Asset Management allocated the biggest weight to Patrick Industries, Inc. (NASDAQ:PATK), around 5.01% of its 13F portfolio. Guardian Point Capital is also relatively very bullish on the stock, earmarking 4.19 percent of its 13F equity portfolio to PATK.
Now, some big names were leading the bulls’ herd. Intrinsic Edge Capital, managed by Mark Coe, established the most valuable position in Patrick Industries, Inc. (NASDAQ:PATK). Intrinsic Edge Capital had $5.4 million invested in the company at the end of the quarter. Paul Marshall and Ian Wace’s Marshall Wace also made a $4.1 million investment in the stock during the quarter. The other funds with brand new PATK positions are Benjamin A. Smith’s Laurion Capital Management, Minhua Zhang’s Weld Capital Management, and Joel Greenblatt’s Gotham Asset Management.
Let’s go over hedge fund activity in other stocks similar to Patrick Industries, Inc. (NASDAQ:PATK). We will take a look at Playa Hotels & Resorts N.V. (NASDAQ:PLYA), Xperi Corporation (NASDAQ:XPER), Fate Therapeutics Inc (NASDAQ:FATE), and Accelerate Diagnostics Inc (NASDAQ:AXDX). This group of stocks’ market caps resemble PATK’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| PLYA | 17 | 436123 | -1 |
| XPER | 19 | 114631 | -2 |
| FATE | 23 | 417119 | 5 |
| AXDX | 6 | 50627 | -4 |
| Average | 16.25 | 254625 | -0.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 16.25 hedge funds with bullish positions and the average amount invested in these stocks was $255 million. That figure was $99 million in PATK’s case. Fate Therapeutics Inc (NASDAQ:FATE) is the most popular stock in this table. On the other hand Accelerate Diagnostics Inc (NASDAQ:AXDX) is the least popular one with only 6 bullish hedge fund positions. Patrick Industries, Inc. (NASDAQ:PATK) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. A small number of hedge funds were also right about betting on PATK as the stock returned 15.5% during the first two months of Q4 and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.
