How do you pick the next stock to invest in? One way would be to spend hours of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don’t always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding PC Connection, Inc. (NASDAQ:CNXN).
Is PC Connection, Inc. (NASDAQ:CNXN) undervalued? The best stock pickers are in a pessimistic mood. The number of long hedge fund bets decreased by 2 recently. Our calculations also showed that CNXN isn’t among the 30 most popular stocks among hedge funds. CNXN was in 6 hedge funds’ portfolios at the end of December. There were 8 hedge funds in our database with CNXN positions at the end of the previous quarter.
Today there are dozens of gauges shareholders put to use to assess their stock investments. A duo of the less known gauges are hedge fund and insider trading activity. Our researchers have shown that, historically, those who follow the top picks of the top fund managers can beat their index-focused peers by a healthy amount (see the details here).
We’re going to go over the latest hedge fund action encompassing PC Connection, Inc. (NASDAQ:CNXN).
How have hedgies been trading PC Connection, Inc. (NASDAQ:CNXN)?
At the end of the fourth quarter, a total of 6 of the hedge funds tracked by Insider Monkey were long this stock, a change of -25% from the second quarter of 2018. On the other hand, there were a total of 8 hedge funds with a bullish position in CNXN a year ago. With hedgies’ positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were increasing their holdings meaningfully (or already accumulated large positions).
The largest stake in PC Connection, Inc. (NASDAQ:CNXN) was held by Royce & Associates, which reported holding $34.6 million worth of stock at the end of December. It was followed by AQR Capital Management with a $2.8 million position. Other investors bullish on the company included Renaissance Technologies, Citadel Investment Group, and Two Sigma Advisors.
Judging by the fact that PC Connection, Inc. (NASDAQ:CNXN) has witnessed a decline in interest from the smart money, it’s safe to say that there exists a select few money managers that elected to cut their full holdings by the end of the third quarter. Interestingly, Israel Englander’s Millennium Management cut the biggest position of the “upper crust” of funds tracked by Insider Monkey, worth about $0.3 million in call options. Matthew Hulsizer’s fund, PEAK6 Capital Management, also dumped its call options, about $0.2 million worth. These transactions are important to note, as aggregate hedge fund interest fell by 2 funds by the end of the third quarter.
Let’s go over hedge fund activity in other stocks similar to PC Connection, Inc. (NASDAQ:CNXN). These stocks are Kenon Holdings Ltd. (NYSE:KEN), Grupo Supervielle S.A. (NYSE:SUPV), Deciphera Pharmaceuticals, Inc. (NASDAQ:DCPH), and AxoGen, Inc. (NASDAQ:AXGN). All of these stocks’ market caps are closest to CNXN’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| KEN | 1 | 1200 | 0 |
| SUPV | 10 | 43989 | 0 |
| DCPH | 15 | 171040 | -1 |
| AXGN | 18 | 103389 | -3 |
| Average | 11 | 79905 | -1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 11 hedge funds with bullish positions and the average amount invested in these stocks was $80 million. That figure was $40 million in CNXN’s case. AxoGen, Inc. (NASDAQ:AXGN) is the most popular stock in this table. On the other hand Kenon Holdings Ltd. (NYSE:KEN) is the least popular one with only 1 bullish hedge fund positions. PC Connection, Inc. (NASDAQ:CNXN) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. A small number of hedge funds were also right about betting on CNXN, though not to the same extent, as the stock returned 18.2% and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.
