We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (10 coronavirus predictions).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. Our extensive research has shown that imitating the smart money can generate significant returns for retail investors, which is why we track nearly 835 active prominent money managers and analyze their quarterly 13F filings. The stocks that are heavily bought by hedge funds historically outperformed the market, though there is no shortage of high profile failures like hedge funds’ 2018 losses in Facebook and Apple. Let’s take a closer look at what the funds we track think about Perrigo Company (NASDAQ:PRGO) in this article.
Is Perrigo Company (NASDAQ:PRGO) the right pick for your portfolio? The smart money is becoming hopeful. The number of long hedge fund positions advanced by 11 recently. Our calculations also showed that PRGO isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 72.9% since March 2017 and outperformed the S&P 500 ETFs by more than 41 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
John Overdeck of Two Sigma Advisors
We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind we’re going to analyze the latest hedge fund action encompassing Perrigo Company (NASDAQ:PRGO).
Hedge fund activity in Perrigo Company (NYSE:PRGO)
Heading into the first quarter of 2020, a total of 27 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 69% from the third quarter of 2019. Below, you can check out the change in hedge fund sentiment towards PRGO over the last 18 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Camber Capital Management held the most valuable stake in Perrigo Company (NYSE:PRGO), which was worth $87.8 million at the end of the third quarter. On the second spot was Diamond Hill Capital which amassed $57.1 million worth of shares. Two Sigma Advisors, Citadel Investment Group, and Magnetar Capital were 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 Camber Capital Management allocated the biggest weight to Perrigo Company (NYSE:PRGO), around 4.47% of its 13F portfolio. Factorial Partners is also relatively very bullish on the stock, setting aside 1.39 percent of its 13F equity portfolio to PRGO.
As aggregate interest increased, key money managers have jumped into Perrigo Company (NYSE:PRGO) headfirst. Magnetar Capital, managed by Alec Litowitz and Ross Laser, initiated the biggest position in Perrigo Company (NYSE:PRGO). Magnetar Capital had $8 million invested in the company at the end of the quarter. Noam Gottesman’s GLG Partners also initiated a $2.7 million position during the quarter. The other funds with brand new PRGO positions are Michael Kharitonov and Jon David McAuliffe’s Voleon Capital, Qing Li’s Sciencast Management, and Steve Cohen’s Point72 Asset Management.
Let’s now take a look at hedge fund activity in other stocks similar to Perrigo Company (NYSE:PRGO). These stocks are PRA Health Sciences Inc (NASDAQ:PRAH), The Madison Square Garden Company (NYSE:MSG), Sociedad Quimica y Minera (NYSE:SQM), and Herbalife Nutrition Ltd. (NYSE:HLF). This group of stocks’ market caps are closest to PRGO’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| PRAH | 38 | 362811 | 3 |
| MSG | 43 | 1919597 | -4 |
| SQM | 13 | 44514 | 5 |
| HLF | 32 | 3311834 | 9 |
| Average | 31.5 | 1409689 | 3.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 31.5 hedge funds with bullish positions and the average amount invested in these stocks was $1410 million. That figure was $237 million in PRGO’s case. The Madison Square Garden Company (NYSE:MSG) is the most popular stock in this table. On the other hand Sociedad Quimica y Minera (NYSE:SQM) is the least popular one with only 13 bullish hedge fund positions. Perrigo Company (NYSE:PRGO) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 22.3% in 2020 through March 16th but still beat the market by 3.2 percentage points. A small number of hedge funds were also right about betting on PRGO as the stock returned -11.5% during the same time period and outperformed the market by an even larger margin.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
