Hedge Funds and other institutional investors have just completed filing their 13Fs with the Securities and Exchange Commission, revealing their equity portfolios as of the end of June. At Insider Monkey, we follow nearly 750 active hedge funds and notable investors and by analyzing their 13F filings, we can determine the stocks that they are collectively bullish on. One of their picks is Pegasystems Inc. (NASDAQ:PEGA), so let’s take a closer look at the sentiment that surrounds it in the current quarter.
Is Pegasystems Inc. (NASDAQ:PEGA) a buy, sell, or hold? Investors who are in the know are taking a pessimistic view. The number of bullish hedge fund bets dropped by 1 lately. Our calculations also showed that PEGA isn’t among the 30 most popular stocks among hedge funds (view the video below).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
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’ 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 market by 40 percentage points since May 2014 through May 30, 2019 (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 25.7% through September 30, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Unlike some fund managers who are betting on Dow reaching 40000 in a year, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. Let’s view the new hedge fund action encompassing Pegasystems Inc. (NASDAQ:PEGA).
How are hedge funds trading Pegasystems Inc. (NASDAQ:PEGA)?
At the end of the second quarter, a total of 24 of the hedge funds tracked by Insider Monkey were long this stock, a change of -4% from the previous quarter. On the other hand, there were a total of 23 hedge funds with a bullish position in PEGA a year ago. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Pegasystems Inc. (NASDAQ:PEGA) was held by SQN Investors, which reported holding $131.2 million worth of stock at the end of March. It was followed by Cadian Capital with a $104.9 million position. Other investors bullish on the company included Fisher Asset Management, Dorsal Capital Management, and Foxhaven Asset Management.
Seeing as Pegasystems Inc. (NASDAQ:PEGA) has witnessed bearish sentiment from hedge fund managers, it’s safe to say that there is a sect of hedge funds that elected to cut their full holdings in the second quarter. Intriguingly, Christian Leone’s Luxor Capital Group sold off the largest stake of the 750 funds watched by Insider Monkey, comprising an estimated $186.1 million in stock, and Mark N. Diker’s Diker Management was right behind this move, as the fund sold off about $4.9 million worth. These transactions are intriguing to say the least, as total hedge fund interest fell by 1 funds in the second quarter.
Let’s check out hedge fund activity in other stocks similar to Pegasystems Inc. (NASDAQ:PEGA). We will take a look at ITT Inc. (NYSE:ITT), Casey’s General Stores, Inc. (NASDAQ:CASY), SolarWinds Corporation (NYSE:SWI), and RealPage, Inc. (NASDAQ:RP). This group of stocks’ market values are closest to PEGA’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| ITT | 25 | 595139 | 3 |
| CASY | 18 | 103589 | 0 |
| SWI | 22 | 2526424 | 7 |
| RP | 33 | 584419 | 7 |
| Average | 24.5 | 952393 | 4.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 24.5 hedge funds with bullish positions and the average amount invested in these stocks was $952 million. That figure was $628 million in PEGA’s case. RealPage, Inc. (NASDAQ:RP) 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 18 bullish hedge fund positions. Pegasystems Inc. (NASDAQ:PEGA) 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. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately PEGA wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); PEGA investors were disappointed as the stock returned -4.4% during the third quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far in 2019.
Disclosure: None. This article was originally published at Insider Monkey.
