We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (see why hell is coming).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. We at Insider Monkey have gone over 835 13F filings that hedge funds and prominent investors are required to file by the SEC The 13F filings show the funds’ and investors’ portfolio positions as of December 31st. In this article, we look at what those funds think of Pluralsight, Inc. (NASDAQ:PS) based on that data.
Pluralsight, Inc. (NASDAQ:PS) has seen a decrease in enthusiasm from smart money in recent months. PS was in 18 hedge funds’ portfolios at the end of the fourth quarter of 2019. There were 22 hedge funds in our database with PS positions at the end of the previous quarter. Our calculations also showed that PS isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 72.9% since March 2017 and outperformed the S&P 500 ETFs by more than 41 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
David E. Shaw of D.E. Shaw
We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind let’s go over the key hedge fund action encompassing Pluralsight, Inc. (NASDAQ:PS).
What have hedge funds been doing with Pluralsight, Inc. (NASDAQ:PS)?
At the end of the fourth quarter, a total of 18 of the hedge funds tracked by Insider Monkey were long this stock, a change of -18% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards PS over the last 18 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 Pluralsight, Inc. (NASDAQ:PS) was held by Zevenbergen Capital Investments, which reported holding $21.2 million worth of stock at the end of September. It was followed by D E Shaw with a $19.9 million position. Other investors bullish on the company included Akaris Global Partners, Point72 Asset Management, and SCGE Management. In terms of the portfolio weights assigned to each position Akaris Global Partners allocated the biggest weight to Pluralsight, Inc. (NASDAQ:PS), around 11.24% of its 13F portfolio. North Run Capital is also relatively very bullish on the stock, designating 6.33 percent of its 13F equity portfolio to PS.
Judging by the fact that Pluralsight, Inc. (NASDAQ:PS) has experienced falling interest from the smart money, logic holds that there exists a select few money managers that decided to sell off their entire stakes by the end of the third quarter. Intriguingly, Brian Ashford-Russell and Tim Woolley’s Polar Capital dropped the biggest investment of the “upper crust” of funds monitored by Insider Monkey, valued at an estimated $5.1 million in stock, and Cliff Asness’s AQR Capital Management was right behind this move, as the fund said goodbye to about $2.5 million worth. These transactions are intriguing to say the least, as total hedge fund interest dropped by 4 funds by the end of the third quarter.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Pluralsight, Inc. (NASDAQ:PS) but similarly valued. These stocks are Visteon Corp (NYSE:VC), Chart Industries, Inc. (NASDAQ:GTLS), Newmark Group, Inc. (NASDAQ:NMRK), and SVMK Inc. (NASDAQ:SVMK). This group of stocks’ market caps are closest to PS’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| VC | 29 | 276807 | 6 |
| GTLS | 19 | 268582 | -4 |
| NMRK | 23 | 157189 | 1 |
| SVMK | 31 | 302485 | 5 |
| Average | 25.5 | 251266 | 2 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 25.5 hedge funds with bullish positions and the average amount invested in these stocks was $251 million. That figure was $153 million in PS’s case. SVMK Inc. (NASDAQ:SVMK) is the most popular stock in this table. On the other hand Chart Industries, Inc. (NASDAQ:GTLS) is the least popular one with only 19 bullish hedge fund positions. Compared to these stocks Pluralsight, Inc. (NASDAQ:PS) is even less popular than GTLS. Hedge funds dodged a bullet by taking a bearish stance towards PS. Our calculations showed that the top 20 most popular hedge fund stocks returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 17.4% in 2020 through March 25th but managed to beat the market by 5.5 percentage points. Unfortunately PS wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); PS investors were disappointed as the stock returned -34.5% during the same time period 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 most of these stocks already outperformed the market so far in Q1.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
