It was a rough fourth quarter for many hedge funds, which were naturally unable to overcome the big dip in the broad market, as the S&P 500 fell by about 4.8% during 2018 and average hedge fund losing about 1%. The Russell 2000, composed of smaller companies, performed even worse, trailing the S&P by more than 6 percentage points, as investors fled less-known quantities for safe havens. Luckily hedge funds were shifting their holdings into large-cap stocks. The 20 most popular hedge fund stocks actually generated an average return of 24.4% during the first 9 months of 2019 and outperformed the S&P 500 ETF by 4 percentage points. We are done processing the latest 13f filings and in this article we will study how hedge fund sentiment towards Preformed Line Products Company (NASDAQ:PLPC) changed during the first quarter.
Preformed Line Products Company (NASDAQ:PLPC) has seen a decrease in activity from the world’s largest hedge funds lately. Our calculations also showed that PLPC 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.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 25.7% through September 30, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Unlike other investors who track every movement of the 25 largest hedge funds, our long-short investment strategy relies on hedge fund buy/sell signals given by the 100 best performing hedge funds. Let’s take a look at the key hedge fund action surrounding Preformed Line Products Company (NASDAQ:PLPC).
What does smart money think about Preformed Line Products Company (NASDAQ:PLPC)?
Heading into the third quarter of 2019, a total of 5 of the hedge funds tracked by Insider Monkey were long this stock, a change of -29% from the first quarter of 2019. On the other hand, there were a total of 4 hedge funds with a bullish position in PLPC a year ago. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Preformed Line Products Company (NASDAQ:PLPC) was held by Royce & Associates, which reported holding $25.7 million worth of stock at the end of March. It was followed by Renaissance Technologies with a $4.2 million position. Other investors bullish on the company included Arrowstreet Capital, Citadel Investment Group, and Springbok Capital.
Due to the fact that Preformed Line Products Company (NASDAQ:PLPC) has witnessed falling interest from the aggregate hedge fund industry, logic holds that there were a few hedge funds that slashed their positions entirely last quarter. Interestingly, Israel Englander’s Millennium Management cut the biggest stake of all the hedgies followed by Insider Monkey, valued at about $0.4 million in stock, and Paul Marshall and Ian Wace’s Marshall Wace LLP was right behind this move, as the fund cut about $0.4 million worth. These moves are important to note, as total 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 Preformed Line Products Company (NASDAQ:PLPC) but similarly valued. These stocks are SunOpta, Inc. (NASDAQ:STKL), The First Bancorp, Inc. (NASDAQ:FNLC), Cutera, Inc. (NASDAQ:CUTR), and Concert Pharmaceuticals Inc (NASDAQ:CNCE). This group of stocks’ market valuations resemble PLPC’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| STKL | 14 | 112503 | 3 |
| FNLC | 1 | 5979 | 0 |
| CUTR | 10 | 65276 | -4 |
| CNCE | 13 | 69573 | 1 |
| Average | 9.5 | 63333 | 0 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 9.5 hedge funds with bullish positions and the average amount invested in these stocks was $63 million. That figure was $31 million in PLPC’s case. SunOpta, Inc. (NASDAQ:STKL) is the most popular stock in this table. On the other hand The First Bancorp, Inc. (NASDAQ:FNLC) is the least popular one with only 1 bullish hedge fund positions. Preformed Line Products Company (NASDAQ:PLPC) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and 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 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately PLPC wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); PLPC investors were disappointed as the stock returned -1.3% 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 so far in 2019.
Disclosure: None. This article was originally published at Insider Monkey.
