Out of thousands of stocks that are currently traded on the market, it is difficult to identify those that will really generate strong returns. Hedge funds and institutional investors spend millions of dollars on analysts with MBAs and PhDs, who are industry experts and well connected to other industry and media insiders on top of that. Individual investors can piggyback the hedge funds employing these talents and can benefit from their vast resources and knowledge in that way. We analyze quarterly 13F filings of nearly 900 hedge funds and, by looking at the smart money sentiment that surrounds a stock, we can determine whether it has the potential to beat the market over the long-term. Therefore, let’s take a closer look at what smart money thinks about Paysafe Limited (NYSE:PSFE).
Is PSFE a good stock to buy? Hedge funds were taking a bearish view. The number of bullish hedge fund positions went down by 8 recently. Paysafe Limited (NYSE:PSFE) was in 42 hedge funds’ portfolios at the end of the third quarter of 2021. The all time high for this statistic is 50. Our calculations also showed that PSFE isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings). There were 50 hedge funds in our database with PSFE positions at the end of the second quarter.
William Gray of Orbis Investment Management
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. Keeping this in mind let’s analyze the new hedge fund action regarding Paysafe Limited (NYSE:PSFE).
Do Hedge Funds Think PSFE Is A Good Stock To Buy Now?
At the end of the third quarter, a total of 42 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -16% from the second quarter of 2021. On the other hand, there were a total of 0 hedge funds with a bullish position in PSFE a year ago. With hedgies’ capital changing hands, there exists an “upper tier” of noteworthy hedge fund managers who were adding to their stakes substantially (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Dan Loeb’s Third Point has the biggest position in Paysafe Limited (NYSE:PSFE), worth close to $305.9 million, amounting to 1.7% of its total 13F portfolio. Coming in second is Appaloosa Management LP, managed by David Tepper, which holds a $65.9 million position; the fund has 1.6% of its 13F portfolio invested in the stock. Remaining hedge funds and institutional investors with similar optimism comprise Joshua Friedman and Mitchell Julis’s Canyon Capital Advisors, Seth Rosen’s Nitorum Capital and Phill Gross and Robert Atchinson’s Adage Capital Management. In terms of the portfolio weights assigned to each position Indaba Capital Management allocated the biggest weight to Paysafe Limited (NYSE:PSFE), around 2.79% of its 13F portfolio. Nitorum Capital is also relatively very bullish on the stock, dishing out 1.84 percent of its 13F equity portfolio to PSFE.
Seeing as Paysafe Limited (NYSE:PSFE) has witnessed falling interest from the entirety of the hedge funds we track, we can see that there lies a certain “tier” of hedgies that elected to cut their entire stakes by the end of the third quarter. At the top of the heap, Aaron Cowen’s Suvretta Capital Management cut the biggest stake of the “upper crust” of funds watched by Insider Monkey, comprising about $156.4 million in stock, and Tom Purcell and Marco Tablada’s Alua Capital Management was right behind this move, as the fund dropped about $19.5 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest dropped by 8 funds by the end of the third quarter.
Let’s now take a look at hedge fund activity in other stocks similar to Paysafe Limited (NYSE:PSFE). These stocks are Luminar Technologies, Inc. (NASDAQ:LAZR), Goosehead Insurance, Inc. (NASDAQ:GSHD), Pacific Biosciences of California (NASDAQ:PACB), Dingdong (Cayman) Limited (NYSE:DDL), AbCellera Biologics Inc. (NASDAQ:ABCL), Amplitude Inc. (NASDAQ:AMPL), and Bank OZK (NASDAQ:OZK). All of these stocks’ market caps are similar to PSFE’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| LAZR | 12 | 111108 | -9 |
| GSHD | 13 | 210178 | -1 |
| PACB | 27 | 1341476 | -1 |
| DDL | 5 | 191421 | 5 |
| ABCL | 21 | 660359 | 3 |
| AMPL | 15 | 313271 | 15 |
| OZK | 22 | 128945 | 3 |
| Average | 16.4 | 422394 | 2.1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 16.4 hedge funds with bullish positions and the average amount invested in these stocks was $422 million. That figure was $597 million in PSFE’s case. Pacific Biosciences of California (NASDAQ:PACB) is the most popular stock in this table. On the other hand Dingdong (Cayman) Limited (NYSE:DDL) is the least popular one with only 5 bullish hedge fund positions. Compared to these stocks Paysafe Limited (NYSE:PSFE) is more popular among hedge funds. Our overall hedge fund sentiment score for PSFE is 72.2. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 28.6% in 2021 through November 30th and still beat the market by 5.6 percentage points. Unfortunately PSFE wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on PSFE were disappointed as the stock returned -53.2% since the end of the third quarter (through 11/30) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market since 2019.
Follow Paysafe Limited (NYSE:PSFE)
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Disclosure: None. This article was originally published at Insider Monkey.
