Is Perion Network Ltd (NASDAQ:PERI) a good stock to buy right now? We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also employ numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.
Perion Network Ltd (NASDAQ:PERI) shareholders have witnessed an increase in activity from the world’s largest hedge funds in recent months. PERI was in 3 hedge funds’ portfolios at the end of the third quarter of 2019. There were 1 hedge funds in our database with PERI positions at the end of the previous quarter. Our calculations also showed that PERI isn’t among the 30 most popular stocks among hedge funds.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 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 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. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
Ken Griffin of Citadel Investment Group
Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world’s most bearish hedge fund that’s more convinced than ever that a crash is coming, our long-short investment strategy doesn’t rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds‘ buy/sell signals. Let’s take a look at the latest hedge fund action surrounding Perion Network Ltd (NASDAQ:PERI).
How have hedgies been trading Perion Network Ltd (NASDAQ:PERI)?
At Q3’s end, a total of 3 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 200% from the previous quarter. The graph below displays the number of hedge funds with bullish position in PERI over the last 17 quarters. With the smart money’s capital changing hands, there exists a few notable hedge fund managers who were boosting their stakes substantially (or already accumulated large positions).
More specifically, Renaissance Technologies was the largest shareholder of Perion Network Ltd (NASDAQ:PERI), with a stake worth $9 million reported as of the end of September. Trailing Renaissance Technologies was Citadel Investment Group, which amassed a stake valued at $0.1 million. PDT Partners was 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 Renaissance Technologies allocated the biggest weight to Perion Network Ltd (NASDAQ:PERI), around 0.01% of its portfolio. PDT Partners is also relatively very bullish on the stock, earmarking 0.01 percent of its 13F equity portfolio to PERI.
With a general bullishness amongst the heavyweights, some big names have jumped into Perion Network Ltd (NASDAQ:PERI) headfirst. Citadel Investment Group, managed by Ken Griffin, initiated the biggest position in Perion Network Ltd (NASDAQ:PERI). Citadel Investment Group had $0.1 million invested in the company at the end of the quarter. Peter Muller’s PDT Partners also made a $0.1 million investment in the stock during the quarter.
Let’s now take a look at hedge fund activity in other stocks similar to Perion Network Ltd (NASDAQ:PERI). We will take a look at Flotek Industries Inc (NYSE:FTK), RADCOM Ltd. (NASDAQ:RDCM), Citizens Community Bancorp Inc. (NASDAQ:CZWI), and Travelzoo (NASDAQ:TZOO). This group of stocks’ market valuations are closest to PERI’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| FTK | 10 | 17580 | 0 |
| RDCM | 4 | 14881 | 0 |
| CZWI | 4 | 8408 | 1 |
| TZOO | 9 | 16544 | 0 |
| Average | 6.75 | 14353 | 0.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 6.75 hedge funds with bullish positions and the average amount invested in these stocks was $14 million. That figure was $9 million in PERI’s case. Flotek Industries Inc (NYSE:FTK) is the most popular stock in this table. On the other hand RADCOM Ltd. (NASDAQ:RDCM) is the least popular one with only 4 bullish hedge fund positions. Compared to these stocks Perion Network Ltd (NASDAQ:PERI) is even less popular than RDCM. Hedge funds dodged a bullet by taking a bearish stance towards PERI. Our calculations showed that the top 20 most popular hedge fund stocks returned 34.7% in 2019 through November 22nd and outperformed the S&P 500 ETF (SPY) by 8.5 percentage points. Unfortunately PERI wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); PERI investors were disappointed as the stock returned 3.1% during the fourth quarter (through 11/22) 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 70 percent of these stocks already outperformed the market so far in Q4.
Disclosure: None. This article was originally published at Insider Monkey.
