Is PII Stock A Buy or Sell?

In this article you are going to find out whether hedge funds think Polaris Inc. (NYSE:PII) is a good investment right now. We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It’s not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.

Is PII stock a buy? The best stock pickers were getting less optimistic. The number of long hedge fund bets were cut by 8 in recent months. Polaris Inc. (NYSE:PII) was in 31 hedge funds’ portfolios at the end of December. The all time high for this statistic is 39. Our calculations also showed that PII isn’t among the 30 most popular stocks among hedge funds (click for Q4 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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 124 percentage points since March 2017 (see the details here).

John Overdeck of Two Sigma Advisors

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, we heard that billionaire Peter Thiel is backing this psychedelic-drug startup. So, we are taking a closer look at this space. We go through lists like the 10 best biotech stocks under $10 to identify the next stock with 10x upside potential. 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 website. Keeping this in mind let’s take a look at the key hedge fund action surrounding Polaris Inc. (NYSE:PII).

Do Hedge Funds Think PII Is A Good Stock To Buy Now?

At the end of the fourth quarter, a total of 31 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -21% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in PII over the last 22 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, Arrowstreet Capital was the largest shareholder of Polaris Inc. (NYSE:PII), with a stake worth $64.9 million reported as of the end of December. Trailing Arrowstreet Capital was Fisher Asset Management, which amassed a stake valued at $57.8 million. D E Shaw, Two Sigma Advisors, and Renaissance Technologies 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 Silver Heights Capital Management allocated the biggest weight to Polaris Inc. (NYSE:PII), around 11.41% of its 13F portfolio. Lodge Hill Capital is also relatively very bullish on the stock, designating 2.29 percent of its 13F equity portfolio to PII.

Because Polaris Inc. (NYSE:PII) has faced declining sentiment from the entirety of the hedge funds we track, we can see that there is a sect of fund managers that slashed their positions entirely heading into Q1. It’s worth mentioning that Karthik Sarma’s SRS Investment Management cut the biggest position of the 750 funds followed by Insider Monkey, worth close to $55.1 million in stock. Alexander Mitchell’s fund, Scopus Asset Management, also cut its stock, about $17.6 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest dropped by 8 funds heading into Q1.

Let’s check out hedge fund activity in other stocks similar to Polaris Inc. (NYSE:PII). We will take a look at Companhia de Saneamento Básico do Estado de São Paulo – SABESP (NYSE:SBS), Leggett & Platt, Inc. (NYSE:LEG), Turning Point Therapeutics, Inc. (NASDAQ:TPTX), Parsley Energy Inc (NYSE:PE), Nikola Corporation (NASDAQ:NKLA), Herbalife Nutrition Ltd. (NYSE:HLF), and The Timken Company (NYSE:TKR). This group of stocks’ market valuations are closest to PII’s market valuation.

View table here if you experience formatting issues.

As you can see these stocks had an average of 26.3 hedge funds with bullish positions and the average amount invested in these stocks was $709 million. That figure was $487 million in PII’s case. Herbalife Nutrition Ltd. (NYSE:HLF) is the most popular stock in this table. On the other hand Companhia de Saneamento Básico do Estado de São Paulo – SABESP (NYSE:SBS) is the least popular one with only 12 bullish hedge fund positions. Polaris Inc. (NYSE:PII) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for PII is 53.6. 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 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks gained 12.2% in 2021 through April 12th and still beat the market by 1.5 percentage points. Hedge funds were also right about betting on PII as the stock returned 49.2% since the end of Q4 (through 4/12) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

Disclosure: None. This article was originally published at Insider Monkey.