Looking for stocks with high upside potential? 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 13.1% in the 2.5 months of 2019 (including dividend payments). Conversely, hedge funds’ 15 preferred S&P 500 stocks generated a return of 19.7% during the same period, with 93% of these stock picks outperforming the broader market benchmark. Coincidence? It might happen to be so, but it is unlikely. Our research covering the last 18 years 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 PJT Partners Inc (NYSE:PJT).
PJT Partners Inc (NYSE:PJT) shareholders have witnessed an increase in support from the world’s most elite money managers of late. Our calculations also showed that pjt isn’t among the 30 most popular stocks among hedge funds.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 32 percentage points since May 2014 through March 12, 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. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in our short portfolio.
We’re going to review the recent hedge fund action encompassing PJT Partners Inc (NYSE:PJT).
How are hedge funds trading PJT Partners Inc (NYSE:PJT)?
Heading into the first quarter of 2019, a total of 18 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 6% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards PJT over the last 14 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in PJT Partners Inc (NYSE:PJT) was held by Corsair Capital LLC, which reported holding $50.8 million worth of stock at the end of December. It was followed by MHR Fund Management with a $34.1 million position. Other investors bullish on the company included Sessa Capital, Renaissance Technologies, and Millennium Management.
As industrywide interest jumped, key hedge funds have been driving this bullishness. Corsair Capital LLC, managed by D.T. Ignacio Jayanti, assembled the most valuable position in PJT Partners Inc (NYSE:PJT). Corsair Capital LLC had $50.8 million invested in the company at the end of the quarter. David Keidan’s Buckingham Capital Management also made a $1.7 million investment in the stock during the quarter. The only other fund with a brand new PJT position is Paul Marshall and Ian Wace’s Marshall Wace LLP.
Let’s now take a look at hedge fund activity in other stocks similar to PJT Partners Inc (NYSE:PJT). We will take a look at Natera Inc (NASDAQ:NTRA), Qiwi PLC (NASDAQ:QIWI), Bain Capital Specialty Finance, Inc. (NYSE:BCSF), and Standex International Corporation (NYSE:SXI). This group of stocks’ market valuations are similar to PJT’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| NTRA | 17 | 99976 | -4 |
| QIWI | 8 | 96327 | 0 |
| BCSF | 3 | 27479 | 3 |
| SXI | 8 | 13557 | -4 |
| Average | 9 | 59335 | -1.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 9 hedge funds with bullish positions and the average amount invested in these stocks was $59 million. That figure was $142 million in PJT’s case. Natera Inc (NASDAQ:NTRA) is the most popular stock in this table. On the other hand Bain Capital Specialty Finance, Inc. (NYSE:BCSF) is the least popular one with only 3 bullish hedge fund positions. Compared to these stocks PJT Partners Inc (NYSE:PJT) is more popular among hedge funds. Our calculations showed that top 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. Unfortunately PJT wasn’t nearly as popular as these 15 stock and hedge funds that were betting on PJT were disappointed as the stock returned 8.5% and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 15 most popular stocks) among hedge funds as 13 of these stocks already outperformed the market this year.
Disclosure: None. This article was originally published at Insider Monkey.
