After several tireless days we have finished crunching the numbers from nearly 900 13F filings issued by the elite hedge funds and other investment firms that we track at Insider Monkey, which disclosed those firms’ equity portfolios as of March 31st. The results of that effort will be put on display in this article, as we share valuable insight into the smart money sentiment towards Pearson PLC (NYSE:PSO).
Is PSO a good stock to buy? Pearson PLC (NYSE:PSO) investors should pay attention to an increase in activity from the world’s largest hedge funds in recent months. Pearson PLC (NYSE:PSO) was in 6 hedge funds’ portfolios at the end of the first quarter of 2021. The all time high for this statistic is 9. Our calculations also showed that PSO isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).
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 115 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.
Ryan Tolkin, CIO of Schonfeld Strategic Advisors
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, an activist hedge fund owns nearly 40% of this $24 biotech stock and is trying to buy the rest for around $50. So, we recommended a long position to our monthly premium newsletter subscribers. We go through lists like the 10 best battery 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. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. Keeping this in mind let’s take a peek at the latest hedge fund action surrounding Pearson PLC (NYSE:PSO).
Do Hedge Funds Think PSO Is A Good Stock To Buy Now?
Heading into the second quarter of 2021, a total of 6 of the hedge funds tracked by Insider Monkey were long this stock, a change of 20% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in PSO over the last 23 quarters. With the smart money’s sentiment swirling, there exists an “upper tier” of noteworthy hedge fund managers who were increasing their holdings substantially (or already accumulated large positions).
The largest stake in Pearson PLC (NYSE:PSO) was held by Arrowstreet Capital, which reported holding $8.7 million worth of stock at the end of December. It was followed by 13D Management with a $6.4 million position. Other investors bullish on the company included Renaissance Technologies, Citadel Investment Group, and Schonfeld Strategic Advisors. In terms of the portfolio weights assigned to each position 13D Management allocated the biggest weight to Pearson PLC (NYSE:PSO), around 2.38% of its 13F portfolio. Arrowstreet Capital is also relatively very bullish on the stock, setting aside 0.01 percent of its 13F equity portfolio to PSO.
Now, key money managers were leading the bulls’ herd. Schonfeld Strategic Advisors, managed by Ryan Tolkin (CIO), assembled the most outsized position in Pearson PLC (NYSE:PSO). Schonfeld Strategic Advisors had $0.6 million invested in the company at the end of the quarter. Michael Gelband’s ExodusPoint Capital also initiated a $0.3 million position during the quarter.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Pearson PLC (NYSE:PSO) but similarly valued. These stocks are Genpact Limited (NYSE:G), Casey’s General Stores, Inc. (NASDAQ:CASY), RenaissanceRe Holdings Ltd. (NYSE:RNR), Knight-Swift Transportation Holdings Inc. (NYSE:KNX), DXC Technology Company (NYSE:DXC), Syneos Health, Inc. (NASDAQ:SYNH), and Federal Realty Investment Trust (NYSE:FRT). All of these stocks’ market caps resemble PSO’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| G | 23 | 271528 | -8 |
| CASY | 11 | 96510 | -12 |
| RNR | 30 | 470953 | -9 |
| KNX | 25 | 341454 | -9 |
| DXC | 28 | 1057642 | -11 |
| SYNH | 28 | 460253 | -1 |
| FRT | 16 | 43276 | -1 |
| Average | 23 | 391659 | -7.3 |
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 $392 million. That figure was $20 million in PSO’s case. RenaissanceRe Holdings Ltd. (NYSE:RNR) is the most popular stock in this table. On the other hand Casey’s General Stores, Inc. (NASDAQ:CASY) is the least popular one with only 11 bullish hedge fund positions. Compared to these stocks Pearson PLC (NYSE:PSO) is even less popular than CASY. Our overall hedge fund sentiment score for PSO is 26. 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 19.3% in 2021 through June 25th but managed to beat the market by 4.8 percentage points. A small number of hedge funds were also right about betting on PSO, though not to the same extent, as the stock returned 10% since the end of March (through June 25th) and outperformed the market as well.
Follow Pearson Plc (NYSE:PSO)
Follow Pearson Plc (NYSE:PSO)
Suggested Articles:
- How to Best Use Insider Monkey To Increase Your Returns
- 15 Best E-Commerce Stocks To Buy Now
- Top 10 Stocks to Buy Right Now
Disclosure: None. This article was originally published at Insider Monkey.
