While the market driven by short-term sentiment influenced by the accommodative interest rate environment in the US, virus news and stimulus spending, many smart money investors are starting to get cautious towards the current bull run since March, 2020 and hedging or reducing many of their long positions. Some fund managers are betting on Dow hitting 40,000 to generate strong returns. However, as we know, big investors usually buy stocks with strong fundamentals that can deliver gains both in bull and bear markets, which is why we believe we can profit from imitating them. In this article, we are going to take a look at the smart money sentiment surrounding Polaris Inc. (NYSE:PII).
Is PII a good stock to buy? Polaris Inc. (NYSE:PII) shareholders have witnessed a decrease in hedge fund interest in recent months. Polaris Inc. (NYSE:PII) was in 29 hedge funds’ portfolios at the end of the first quarter of 2021. The all time high for this statistic is 39. There were 31 hedge funds in our database with PII holdings at the end of December. Our calculations also showed that PII isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 115 percentage points since March 2017 (see the details here). That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
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 let’s take a look at the latest hedge fund action surrounding Polaris Inc. (NYSE:PII).
Do Hedge Funds Think PII Is A Good Stock To Buy Now?
Heading into the second quarter of 2021, a total of 29 of the hedge funds tracked by Insider Monkey were long this stock, a change of -6% from the previous quarter. The graph below displays the number of hedge funds with bullish position in PII over the last 23 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Polaris Inc. (NYSE:PII) was held by Two Sigma Advisors, which reported holding $78.5 million worth of stock at the end of December. It was followed by Fisher Asset Management with a $75.2 million position. Other investors bullish on the company included D E Shaw, Arrowstreet Capital, and Silver Heights Capital Management. In terms of the portfolio weights assigned to each position Silver Heights Capital Management allocated the biggest weight to Polaris Inc. (NYSE:PII), around 14.83% of its 13F portfolio. Capital Growth Management is also relatively very bullish on the stock, earmarking 2.44 percent of its 13F equity portfolio to PII.
Judging by the fact that Polaris Inc. (NYSE:PII) has faced a decline in interest from hedge fund managers, we can see that there lies a certain “tier” of hedgies that elected to cut their positions entirely last quarter. Intriguingly, Clint Murray’s Lodge Hill Capital said goodbye to the largest investment of the “upper crust” of funds watched by Insider Monkey, worth an estimated $6.7 million in stock. Michael Gelband’s fund, ExodusPoint Capital, also sold off its stock, about $6.3 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest was cut by 2 funds last quarter.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Polaris Inc. (NYSE:PII) but similarly valued. We will take a look at Ares Capital Corporation (NASDAQ:ARCC), CyrusOne Inc (NASDAQ:CONE), AerCap Holdings N.V. (NYSE:AER), First Citizens BancShares Inc. (NASDAQ:FCNCA), Encompass Health Corporation (NYSE:EHC), Kimco Realty Corp (NYSE:KIM), and Oshkosh Corporation (NYSE:OSK). This group of stocks’ market valuations are closest to PII’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| ARCC | 15 | 84000 | 0 |
| CONE | 21 | 202453 | 0 |
| AER | 43 | 1675105 | 3 |
| FCNCA | 29 | 606668 | 2 |
| EHC | 36 | 836170 | 1 |
| KIM | 17 | 90007 | -5 |
| OSK | 26 | 416413 | -14 |
| Average | 26.7 | 558688 | -1.9 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 26.7 hedge funds with bullish positions and the average amount invested in these stocks was $559 million. That figure was $510 million in PII’s case. AerCap Holdings N.V. (NYSE:AER) is the most popular stock in this table. On the other hand Ares Capital Corporation (NASDAQ:ARCC) is the least popular one with only 15 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 50.3. 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. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. 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 22.8% in 2021 through July 2nd and beat the market again by 6 percentage points. Unfortunately PII wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on PII were disappointed as the stock returned 1.8% since the end of March (through 7/2) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.
Follow Polaris Inc. (NYSE:PII)
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Disclosure: None. This article was originally published at Insider Monkey.
