In this article we will analyze whether Primo Water Corporation (NYSE:PRMW) is a good investment right now by following the lead of some of the best investors in the world and piggybacking their ideas. There’s no better way to get these firms’ immense resources and analytical capabilities working for us than to follow their lead into their best ideas. While not all of these picks will be winners, our research shows that these picks historically outperformed the market by double digits annually.
Is PRMW a good stock to buy now? Primo Water Corporation (NYSE:PRMW) shares haven’t seen a lot of action during the second quarter. Overall, hedge fund sentiment was unchanged. The stock was in 32 hedge funds’ portfolios at the end of the first quarter of 2021. Our calculations also showed that PRMW isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings). The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Amicus Therapeutics, Inc. (NASDAQ:FOLD), BRP Group, Inc. (NASDAQ:BRP), and Cimpress plc (NASDAQ:CMPR) to gather more data points.
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.
Kevin Oram of Praesidium Investment Management Company
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Do Hedge Funds Think PRMW Is A Good Stock To Buy Now?
Heading into the second quarter of 2021, a total of 32 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from the fourth quarter of 2020. By comparison, 36 hedge funds held shares or bullish call options in PRMW a year ago. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Nitorum Capital was the largest shareholder of Primo Water Corporation (NYSE:PRMW), with a stake worth $139.8 million reported as of the end of March. Trailing Nitorum Capital was Praesidium Investment Management Company, which amassed a stake valued at $128.4 million. P2 Capital Partners, Hawk Ridge Management, and StackLine Partners 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 StackLine Partners allocated the biggest weight to Primo Water Corporation (NYSE:PRMW), around 10.72% of its 13F portfolio. Nitorum Capital is also relatively very bullish on the stock, earmarking 7.15 percent of its 13F equity portfolio to PRMW.
Seeing as Primo Water Corporation (NYSE:PRMW) has faced falling interest from hedge fund managers, it’s safe to say that there was a specific group of hedge funds that decided to sell off their entire stakes in the first quarter. It’s worth mentioning that Scott Ferguson’s Sachem Head Capital dumped the biggest investment of the “upper crust” of funds followed by Insider Monkey, worth an estimated $27 million in stock. Charles Akre’s fund, Akre Capital Management, also cut its stock, about $0.5 million worth. These bearish behaviors are interesting, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Primo Water Corporation (NYSE:PRMW) but similarly valued. We will take a look at Amicus Therapeutics, Inc. (NASDAQ:FOLD), BRP Group, Inc. (NASDAQ:BRP), Cimpress plc (NASDAQ:CMPR), Mimecast Limited (NASDAQ:MIME), Deciphera Pharmaceuticals, Inc. (NASDAQ:DCPH), MGE Energy, Inc. (NASDAQ:MGEE), and Cadence Bancorporation (NYSE:CADE). This group of stocks’ market caps resemble PRMW’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| FOLD | 30 | 784712 | -7 |
| BRP | 12 | 114604 | -8 |
| CMPR | 21 | 306977 | -2 |
| MIME | 24 | 221415 | -4 |
| DCPH | 23 | 511975 | -13 |
| MGEE | 8 | 37474 | 2 |
| CADE | 27 | 176068 | 8 |
| Average | 20.7 | 307604 | -3.4 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 20.7 hedge funds with bullish positions and the average amount invested in these stocks was $308 million. That figure was $654 million in PRMW’s case. Amicus Therapeutics, Inc. (NASDAQ:FOLD) is the most popular stock in this table. On the other hand MGE Energy, Inc. (NASDAQ:MGEE) is the least popular one with only 8 bullish hedge fund positions. Compared to these stocks Primo Water Corporation (NYSE:PRMW) is more popular among hedge funds. Our overall hedge fund sentiment score for PRMW is 81.7. 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 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 still beat the market by 6 percentage points. Unfortunately PRMW wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on PRMW were disappointed as the stock returned 1.8% since the end of the first quarter (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 most of these stocks already outperformed the market since 2019.
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Disclosure: None. This article was originally published at Insider Monkey.
