Most investors tend to think that hedge funds and other asset managers are worthless, as they cannot beat even simple index fund portfolios. In fact, most people expect hedge funds to compete with and outperform the bull market that we have witnessed in recent years. However, hedge funds are generally partially hedged and aim at delivering attractive risk-adjusted returns rather than following the ups and downs of equity markets hoping that they will outperform the broader market. Our research shows that certain hedge funds do have great stock picking skills (and we can identify these hedge funds in advance pretty accurately), so let’s take a glance at the smart money sentiment towards PPD, Inc. (NASDAQ:PPD).
Is PPD a good stock to buy? PPD, Inc. (NASDAQ:PPD) investors should pay attention to an increase in support from the world’s most elite money managers of late. PPD, Inc. (NASDAQ:PPD) was in 33 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistic is 27. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that PPD isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks).
Video: Watch our video about the top 5 most popular hedge fund stocks.
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 66 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Daniel Sundheim of D1 Capital Partners
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, the House passed a landmark bill decriminalizing marijuana. So, we are checking out this under the radar cannabis stock right now. We go through lists like the 15 best blue chip stocks to buy to pick the best large-cap stocks to buy. 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 peek at the new hedge fund action encompassing PPD, Inc. (NASDAQ:PPD).
Do Hedge Funds Think PPD Is A Good Stock To Buy Now?
Heading into the fourth quarter of 2020, a total of 33 of the hedge funds tracked by Insider Monkey were long this stock, a change of 22% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in PPD over the last 21 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in PPD, Inc. (NASDAQ:PPD) was held by FPR Partners, which reported holding $244.7 million worth of stock at the end of September. It was followed by D1 Capital Partners with a $126.8 million position. Other investors bullish on the company included Holocene Advisors, Millennium Management, and Arrowstreet Capital. In terms of the portfolio weights assigned to each position Clearfield Capital allocated the biggest weight to PPD, Inc. (NASDAQ:PPD), around 13.01% of its 13F portfolio. FPR Partners is also relatively very bullish on the stock, setting aside 8.41 percent of its 13F equity portfolio to PPD.
With a general bullishness amongst the heavyweights, key money managers have jumped into PPD, Inc. (NASDAQ:PPD) headfirst. Point72 Asset Management, managed by Steve Cohen, initiated the largest position in PPD, Inc. (NASDAQ:PPD). Point72 Asset Management had $37.4 million invested in the company at the end of the quarter. Efrem Kamen’s Pura Vida Investments also made a $22.2 million investment in the stock during the quarter. The other funds with new positions in the stock are Anand Parekh’s Alyeska Investment Group, Sander Gerber’s Hudson Bay Capital Management, and Kevin Michael Ulrich and Anthony Davis’s Anchorage Advisors.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as PPD, Inc. (NASDAQ:PPD) but similarly valued. These stocks are Alliant Energy Corporation (NYSE:LNT), Huazhu Group Limited (NASDAQ:HTHT), Brown & Brown, Inc. (NYSE:BRO), Godaddy Inc (NYSE:GDDY), FactSet Research Systems Inc. (NYSE:FDS), Celanese Corporation (NYSE:CE), and Clarivate Plc (NYSE:CCC). This group of stocks’ market values are similar to PPD’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| LNT | 30 | 284962 | 7 |
| HTHT | 21 | 563489 | 4 |
| BRO | 29 | 722785 | 5 |
| GDDY | 44 | 2416306 | -11 |
| FDS | 29 | 226885 | 8 |
| CE | 26 | 753664 | -7 |
| CCC | 37 | 1729517 | -8 |
| Average | 30.9 | 956801 | -0.3 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 30.9 hedge funds with bullish positions and the average amount invested in these stocks was $957 million. That figure was $1038 million in PPD’s case. Godaddy Inc (NYSE:GDDY) is the most popular stock in this table. On the other hand Huazhu Group Limited (NASDAQ:HTHT) is the least popular one with only 21 bullish hedge fund positions. PPD, Inc. (NASDAQ:PPD) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for PPD is 66.1. 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 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 33.3% in 2020 through December 18th and beat the market again by 16.4 percentage points. Unfortunately PPD wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on PPD were disappointed as the stock returned -4.5% since the end of September (through 12/18) 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 so far this year.
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Disclosure: None. This article was originally published at Insider Monkey.
