Is PRGS A Good Stock To Buy Now According To Hedge Funds?

We at Insider Monkey have gone over 817 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 September 30th. In this article, we look at what those funds think of Progress Software Corporation (NASDAQ:PRGS) based on that data.

Is PRGS a good stock to buy now? Progress Software Corporation (NASDAQ:PRGS) has experienced a decrease in hedge fund sentiment lately. Progress Software Corporation (NASDAQ:PRGS) was in 21 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistic is 27. There were 27 hedge funds in our database with PRGS holdings at the end of June. Our calculations also showed that PRGS 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.

So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.

Paul Marshall of Marshall Wace

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks 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. Now we’re going to review the key hedge fund action encompassing Progress Software Corporation (NASDAQ:PRGS).

Do Hedge Funds Think PRGS Is A Good Stock To Buy Now?

At Q3’s end, a total of 21 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -22% from the second quarter of 2020. The graph below displays the number of hedge funds with bullish position in PRGS over the last 21 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, Renaissance Technologies was the largest shareholder of Progress Software Corporation (NASDAQ:PRGS), with a stake worth $95.1 million reported as of the end of September. Trailing Renaissance Technologies was GLG Partners, which amassed a stake valued at $37.3 million. Marshall Wace LLP, D E Shaw, and Arrowstreet Capital were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position GLG Partners allocated the biggest weight to Progress Software Corporation (NASDAQ:PRGS), around 0.15% of its 13F portfolio. Marshall Wace LLP is also relatively very bullish on the stock, designating 0.1 percent of its 13F equity portfolio to PRGS.

Since Progress Software Corporation (NASDAQ:PRGS) has witnessed bearish sentiment from hedge fund managers, it’s safe to say that there was a specific group of money managers who sold off their entire stakes heading into Q4. Interestingly, Kevin Oram and Peter Uddo’s Praesidium Investment Management Company said goodbye to the largest position of the 750 funds watched by Insider Monkey, valued at an estimated $32.2 million in stock, and Ken Fisher’s Fisher Asset Management was right behind this move, as the fund dumped about $26.3 million worth. These moves are interesting, as aggregate hedge fund interest was cut by 6 funds heading into Q4.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Progress Software Corporation (NASDAQ:PRGS) but similarly valued. We will take a look at Prelude Therapeutics Incorporated (NASDAQ:PRLD), International Bancshares Corp (NASDAQ:IBOC), Walker & Dunlop Inc. (NYSE:WD), Madison Square Garden Entertainment Corp. (NYSE:MSGE), Veoneer, Inc. (NYSE:VNE), Pebblebrook Hotel Trust (NYSE:PEB), and Mueller Water Products, Inc. (NYSE:MWA). This group of stocks’ market caps resemble PRGS’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 18.3 hedge funds with bullish positions and the average amount invested in these stocks was $254 million. That figure was $195 million in PRGS’s case. Madison Square Garden Entertainment Corp. (NYSE:MSGE) is the most popular stock in this table. On the other hand Pebblebrook Hotel Trust (NYSE:PEB) is the least popular one with only 9 bullish hedge fund positions. Progress Software Corporation (NASDAQ:PRGS) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for PRGS is 46.3. 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. 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 30.7% in 2020 through December 14th and still beat the market by 15.8 percentage points. Hedge funds were also right about betting on PRGS as the stock returned 16% since the end of Q3 (through 12/14) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

Disclosure: None. This article was originally published at Insider Monkey.