We are still in an overall bull market and many stocks that smart money investors were piling into surged through October 17th. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 45% and 39% respectively. Hedge funds’ top 3 stock picks returned 34.4% this year and beat the S&P 500 ETFs by 13 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like PJT Partners Inc (NYSE:PJT).
Is PJT Partners Inc (NYSE:PJT) going to take off soon? The best stock pickers are in a bearish mood. The number of long hedge fund positions were cut by 4 recently. Our calculations also showed that PJT isn’t among the 30 most popular stocks among hedge funds (see the video below).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
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 market by 40 percentage points since May 2014 through May 30, 2019 (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.
Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. We’re going to review the recent hedge fund action encompassing PJT Partners Inc (NYSE:PJT).
What have hedge funds been doing with PJT Partners Inc (NYSE:PJT)?
At the end of the second quarter, a total of 15 of the hedge funds tracked by Insider Monkey were long this stock, a change of -21% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in PJT over the last 16 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Corsair Capital LLC held the most valuable stake in PJT Partners Inc (NYSE:PJT), which was worth $53.2 million at the end of the second quarter. On the second spot was MHR Fund Management which amassed $35.7 million worth of shares. Moreover, Millennium Management, Sessa Capital, and GAMCO Investors were also bullish on PJT Partners Inc (NYSE:PJT), allocating a large percentage of their portfolios to this stock.
Seeing as PJT Partners Inc (NYSE:PJT) has faced declining sentiment from the aggregate hedge fund industry, it’s easy to see that there lies a certain “tier” of hedgies that decided to sell off their full holdings heading into Q3. Intriguingly, Paul Marshall and Ian Wace’s Marshall Wace LLP dropped the largest investment of the 750 funds watched by Insider Monkey, totaling an estimated $3.4 million in stock. Ken Griffin’s fund, Citadel Investment Group, also said goodbye to its stock, about $2.1 million worth. These bearish behaviors are important to note, as total hedge fund interest fell by 4 funds heading into Q3.
Let’s now review hedge fund activity in other stocks similar to PJT Partners Inc (NYSE:PJT). These stocks are Spectrum Pharmaceuticals, Inc. (NASDAQ:SPPI), Benchmark Electronics, Inc. (NYSE:BHE), Sturm, Ruger & Company, Inc. (NYSE:RGR), and PetIQ, Inc. (NASDAQ:PETQ). All of these stocks’ market caps are closest to PJT’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| SPPI | 9 | 42962 | -4 |
| BHE | 12 | 41025 | -7 |
| RGR | 13 | 110819 | -4 |
| PETQ | 13 | 86246 | 0 |
| Average | 11.75 | 70263 | -3.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 11.75 hedge funds with bullish positions and the average amount invested in these stocks was $70 million. That figure was $143 million in PJT’s case. Sturm, Ruger & Company, Inc. (NYSE:RGR) is the most popular stock in this table. On the other hand Spectrum Pharmaceuticals, Inc. (NASDAQ:SPPI) is the least popular one with only 9 bullish hedge fund positions. Compared to these stocks PJT Partners Inc (NYSE:PJT) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately PJT wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on PJT were disappointed as the stock returned 0.6% during the third quarter 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 many of these stocks already outperformed the market in Q3.
Disclosure: None. This article was originally published at Insider Monkey.
