A whopping number of 13F filings filed with U.S. Securities and Exchange Commission has been processed by Insider Monkey so that individual investors can look at the overall hedge fund sentiment towards the stocks included in their watchlists. These freshly-submitted public filings disclose money managers’ equity positions as of the end of the three-month period that ended June 30th, so let’s proceed with the discussion of the hedge fund sentiment on Phreesia, Inc. (NYSE:PHR).
Is PHR a good stock to buy? Phreesia, Inc. (NYSE:PHR) investors should be aware of a decrease in hedge fund interest in recent months. Phreesia, Inc. (NYSE:PHR) was in 26 hedge funds’ portfolios at the end of the second quarter of 2021. The all time high for this statistic is 27. Our calculations also showed that PHR isn’t among the 30 most popular stocks among hedge funds (click for Q2 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 79 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.
Henrik Rhenman of Rhenman & Partners Asset Management
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best EV 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. Now we’re going to take a peek at the new hedge fund action regarding Phreesia, Inc. (NYSE:PHR).
Do Hedge Funds Think PHR Is A Good Stock To Buy Now?
At the end of the second quarter, a total of 26 of the hedge funds tracked by Insider Monkey were long this stock, a change of -4% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in PHR over the last 24 quarters. With hedgies’ capital changing hands, there exists a select group of notable hedge fund managers who were adding to their stakes considerably (or already accumulated large positions).
More specifically, Rock Springs Capital Management was the largest shareholder of Phreesia, Inc. (NYSE:PHR), with a stake worth $58.8 million reported as of the end of June. Trailing Rock Springs Capital Management was Driehaus Capital, which amassed a stake valued at $23.2 million. Engle Capital, Millennium Management, and Rhenman & Partners Asset Management 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 Engle Capital allocated the biggest weight to Phreesia, Inc. (NYSE:PHR), around 2.78% of its 13F portfolio. Stony Point Capital is also relatively very bullish on the stock, earmarking 1.97 percent of its 13F equity portfolio to PHR.
Seeing as Phreesia, Inc. (NYSE:PHR) has faced declining sentiment from the aggregate hedge fund industry, it’s easy to see that there lies a certain “tier” of money managers who sold off their full holdings heading into Q3. It’s worth mentioning that Joseph Edelman’s Perceptive Advisors cut the largest stake of the “upper crust” of funds watched by Insider Monkey, comprising an estimated $5.2 million in stock, and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital was right behind this move, as the fund dumped about $2.3 million worth. These moves are interesting, as total hedge fund interest fell by 1 funds heading into Q3.
Let’s go over hedge fund activity in other stocks similar to Phreesia, Inc. (NYSE:PHR). We will take a look at Pebblebrook Hotel Trust (NYSE:PEB), Livent Corporation (NYSE:LTHM), American Equity Investment Life Holding Company (NYSE:AEL), Burning Rock Biotech Limited (NASDAQ:BNR), National Health Investors Inc (NYSE:NHI), CarGurus, Inc. (NASDAQ:CARG), and Corsair Gaming, Inc. (NASDAQ:CRSR). This group of stocks’ market values are closest to PHR’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| PEB | 17 | 57810 | 7 |
| LTHM | 27 | 251159 | 5 |
| AEL | 20 | 187474 | -4 |
| BNR | 9 | 81726 | -2 |
| NHI | 13 | 45554 | 2 |
| CARG | 23 | 241921 | -6 |
| CRSR | 14 | 42455 | 5 |
| Average | 17.6 | 129728 | 1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 17.6 hedge funds with bullish positions and the average amount invested in these stocks was $130 million. That figure was $227 million in PHR’s case. Livent Corporation (NYSE:LTHM) is the most popular stock in this table. On the other hand Burning Rock Biotech Limited (NASDAQ:BNR) is the least popular one with only 9 bullish hedge fund positions. Phreesia, Inc. (NYSE:PHR) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for PHR is 80.1. 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 24.9% in 2021 through October 15th and still beat the market by 4.5 percentage points. Hedge funds were also right about betting on PHR as the stock returned 3.8% since the end of Q2 (through 10/15) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
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Disclosure: None. This article was originally published at Insider Monkey.
