Looking for high-potential stocks? Just follow the big players within the hedge fund industry. Why should you do so? Let’s take a brief look at what statistics have to say about hedge funds’ stock picking abilities to illustrate. The Standard and Poor’s 500 Index returned approximately 7.6% in the 12 months ending November 21, with more than 51% of the stocks in the index failing to beat the benchmark. Therefore, the odds that one will pin down a winner by randomly picking a stock are less than the odds in a fair coin-tossing game. Conversely, best performing hedge funds’ 30 preferred mid-cap stocks generated a return of 18% during the same 12-month period. Coincidence? It might happen to be so, but it is unlikely. Our research covering a 17-year period indicates that hedge funds’ stock picks generate superior risk-adjusted returns. That’s why we believe it is wise to check hedge fund activity before you invest your time or your savings on a stock like Petmed Express Inc (NASDAQ:PETS).
Petmed Express Inc (NASDAQ:PETS) shares didn’t see a lot of action during the third quarter. Overall, hedge fund sentiment was unchanged. The stock was in 10 hedge funds’ portfolios at the end of September, same as at the end of June. At the end of this article we will also compare PETS to other stocks including Kratos Defense & Security Solutions, Inc (NASDAQ:KTOS), Carbonite Inc (NASDAQ:CARB), and QCR Holdings, Inc. (NASDAQ:QCRH) to get a better sense of its popularity.
At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.
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Hedge fund activity in Petmed Express Inc (NASDAQ:PETS)
Heading into the fourth quarter of 2016, a total of 10 of the hedge funds tracked by Insider Monkey held long positions in this stock, unchanged from the second quarter of 2016. On the other hand, there were a total of 8 hedge funds with a bullish position in PETS at the beginning of this year, so hedge fund ownership is still 25% higher in 2016. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
When looking at the institutional investors followed by Insider Monkey, Renaissance Technologies, one of the largest hedge funds in the world, holds the most valuable position in Petmed Express Inc (NASDAQ:PETS). Renaissance Technologies has a $31.8 million position in the stock. The second most bullish fund manager is Chuck Royce of Royce & Associates, holding an $8.1 million position. Remaining professional money managers that hold long positions encompass Cliff Asness’ AQR Capital Management, Ken Fisher’s Fisher Asset Management, and John Overdeck and David Siegel’s Two Sigma Advisors. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-micro-cap stocks.
Since Petmed Express Inc (NASDAQ:PETS) has witnessed a decline in interest from the aggregate hedge fund industry, logic holds that there exists a select few hedge funds that elected to cut their entire stakes in the third quarter. Interestingly, Israel Englander’s Millennium Management cut the biggest stake of all the investors monitored by Insider Monkey, valued at an estimated $0.6 million in stock. Paul Tudor Jones’ fund, Tudor Investment Corp, also said goodbye to its stock, about $0.3 million worth.
Let’s now review hedge fund activity in other stocks similar to Petmed Express Inc (NASDAQ:PETS). These stocks are Kratos Defense & Security Solutions, Inc (NASDAQ:KTOS), Carbonite Inc (NASDAQ:CARB), QCR Holdings, Inc. (NASDAQ:QCRH), and Federal Agricultural Mortgage Corp. (NYSE:AGM). This group of stocks’ market valuations are similar to PETS’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| KTOS | 10 | 41655 | 1 |
| CARB | 22 | 144009 | -1 |
| QCRH | 6 | 47154 | -1 |
| AGM | 8 | 17262 | 2 |
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 $63 million. That figure was $51 million in PETS’s case. Carbonite Inc (NASDAQ:CARB) is the most popular stock in this table. On the other hand QCR Holdings, Inc. (NASDAQ:QCRH) is the least popular one with only 6 bullish hedge fund positions. Petmed Express Inc (NASDAQ:PETS) 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. In this regard CARB might be a better candidate to consider taking a long position in.
Disclosure: None
