Investing in hedge funds can bring large profits, but it’s not for everybody, since hedge funds are available only for high-net-worth individuals. They generate significant returns for investors to justify their large fees and they allocate a lot of time and employ a complex analysis to determine the best stocks to invest in. A particularly interesting group of stocks that hedge funds like is the small-caps. The huge amount of capital does not allow hedge funds to invest a lot in small-caps, but our research showed that their most popular small-cap ideas are less efficiently priced and generate stronger returns than their large- and mega-cap picks and the broader market. That is why we pay special attention to the hedge fund activity in the small-cap space.
Is Prestige Consumer Healthcare Inc. (NYSE:PBH) a buy, sell, or hold? The smart money is getting less bullish. The number of long hedge fund bets dropped by 2 in recent months. Our calculations also showed that PBH isn’t among the 30 most popular stocks among hedge funds. PBH was in 13 hedge funds’ portfolios at the end of the first quarter of 2019. There were 15 hedge funds in our database with PBH holdings at the end of the previous quarter.
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. 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 30.9% through May 30, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
We’re going to view the fresh hedge fund action surrounding Prestige Consumer Healthcare Inc. (NYSE:PBH).
What does smart money think about Prestige Consumer Healthcare Inc. (NYSE:PBH)?
Heading into the second quarter of 2019, a total of 13 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -13% from the previous quarter. The graph below displays the number of hedge funds with bullish position in PBH over the last 15 quarters. With the smart money’s capital changing hands, there exists an “upper tier” of notable hedge fund managers who were adding to their holdings significantly (or already accumulated large positions).
Among these funds, Fisher Asset Management held the most valuable stake in Prestige Consumer Healthcare Inc. (NYSE:PBH), which was worth $38.5 million at the end of the first quarter. On the second spot was GLG Partners which amassed $12.6 million worth of shares. Moreover, Citadel Investment Group, Arrowstreet Capital, and D E Shaw were also bullish on Prestige Consumer Healthcare Inc. (NYSE:PBH), allocating a large percentage of their portfolios to this stock.
Since Prestige Consumer Healthcare Inc. (NYSE:PBH) has faced declining sentiment from the entirety of the hedge funds we track, logic holds that there is a sect of fund managers that elected to cut their full holdings in the third quarter. It’s worth mentioning that Israel Englander’s Millennium Management dumped the largest stake of all the hedgies watched by Insider Monkey, comprising an estimated $4.2 million in stock, and Minhua Zhang’s Weld Capital Management was right behind this move, as the fund dropped about $0.7 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest fell by 2 funds in the third quarter.
Let’s now take a look at hedge fund activity in other stocks similar to Prestige Consumer Healthcare Inc. (NYSE:PBH). These stocks are Matson, Inc. (NYSE:MATX), FBL Financial Group, Inc. (NYSE:FFG), AMC Entertainment Holdings Inc (NYSE:AMC), and Walker & Dunlop Inc. (NYSE:WD). This group of stocks’ market valuations resemble PBH’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| MATX | 9 | 6472 | -3 |
| FFG | 7 | 7522 | 1 |
| AMC | 18 | 121829 | -3 |
| WD | 14 | 49593 | 3 |
| Average | 12 | 46354 | -0.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 12 hedge funds with bullish positions and the average amount invested in these stocks was $46 million. That figure was $67 million in PBH’s case. AMC Entertainment Holdings Inc (NYSE:AMC) is the most popular stock in this table. On the other hand FBL Financial Group, Inc. (NYSE:FFG) is the least popular one with only 7 bullish hedge fund positions. Prestige Consumer Healthcare Inc. (NYSE:PBH) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 20 most popular stocks among hedge funds returned 6.2% in Q2 through June 19th and outperformed the S&P 500 ETF (SPY) by nearly 3 percentage points. Hedge funds were also right about betting on PBH, though not to the same extent, as the stock returned 5.2% during the same time frame and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.
