Although the masses and most of the financial media blame hedge funds for their exorbitant fee structure and disappointing performance, these investors have proved to have great stock picking abilities over the years (that’s why their assets under management continue to swell). We believe hedge fund sentiment should serve as a crucial tool of an individual investor’s stock selection process, as it may offer great insights of how the brightest minds of the finance industry feel about specific stocks. After all, these people have access to the smartest analysts and expensive data/information sources that individual investors can’t match. So should one consider investing in PROG Holdings Inc (NYSE:PRG)? The smart money sentiment can provide an answer to this question.
Is PROG a good stock to buy? PROG Holdings Inc (NYSE:PRG) was in 27 hedge funds’ portfolios at the end of September. The all time high for this statistic is 38. PRG investors should be aware of a decrease in activity from the world’s largest hedge funds of late. There were 37 hedge funds in our database with PRG holdings at the end of June. Our calculations also showed that PRG isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings).
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. Keeping this in mind let’s take a gander at the fresh hedge fund action surrounding PROG Holdings Inc (NYSE:PRG).
Arnaud Ajdler of Engine Capital
Do Hedge Funds Think PRG Is A Good Stock To Buy Now?
At the end of September, a total of 27 of the hedge funds tracked by Insider Monkey were long this stock, a change of -27% from the second quarter of 2021. On the other hand, there were a total of 0 hedge funds with a bullish position in PRG a year ago. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, D. E. Shaw’s D E Shaw has the number one position in PROG Holdings Inc (NYSE:PRG), worth close to $43.4 million, accounting for less than 0.1%% of its total 13F portfolio. The second most bullish fund manager is Solel Partners, led by Craig Peskin and Peter Fleiss, holding a $36.7 million position; the fund has 7.4% of its 13F portfolio invested in the stock. Other professional money managers with similar optimism contain Dennis Goldstein’s Rip Road Capital, Arnaud Ajdler’s Engine Capital and Ari Zweiman’s 683 Capital Partners. In terms of the portfolio weights assigned to each position Lafitte Capital Management allocated the biggest weight to PROG Holdings Inc (NYSE:PRG), around 11.06% of its 13F portfolio. Rip Road Capital is also relatively very bullish on the stock, dishing out 8.24 percent of its 13F equity portfolio to PRG.
Because PROG Holdings Inc (NYSE:PRG) has experienced a decline in interest from the entirety of the hedge funds we track, logic holds that there was a specific group of hedge funds that elected to cut their entire stakes by the end of the third quarter. Intriguingly, Matthew Stadelman’s Diamond Hill Capital dumped the biggest position of all the hedgies tracked by Insider Monkey, worth an estimated $78.1 million in stock, and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital was right behind this move, as the fund dropped about $38.8 million worth. These moves are important to note, as aggregate hedge fund interest fell by 10 funds by the end of the third quarter.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as PROG Holdings Inc (NYSE:PRG) but similarly valued. These stocks are Beacon Roofing Supply, Inc. (NASDAQ:BECN), CareDx, Inc. (NASDAQ:CDNA), Enel Chile S.A. (NYSE:ENIC), EnLink Midstream LLC (NYSE:ENLC), Bank of Hawaii Corporation (NYSE:BOH), White Mountains Insurance Group Ltd (NYSE:WTM), and CorVel Corporation (NASDAQ:CRVL). This group of stocks’ market caps are closest to PRG’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| BECN | 20 | 242330 | 0 |
| CDNA | 29 | 637935 | 1 |
| ENIC | 7 | 14536 | 0 |
| ENLC | 10 | 26653 | 0 |
| BOH | 14 | 40805 | -1 |
| WTM | 14 | 202682 | -3 |
| CRVL | 13 | 213325 | -2 |
| Average | 15.3 | 196895 | -0.7 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 15.3 hedge funds with bullish positions and the average amount invested in these stocks was $197 million. That figure was $298 million in PRG’s case. CareDx, Inc. (NASDAQ:CDNA) is the most popular stock in this table. On the other hand Enel Chile S.A. (NYSE:ENIC) is the least popular one with only 7 bullish hedge fund positions. PROG Holdings Inc (NYSE:PRG) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for PRG is 61.8. 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 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 31.1% in 2021 through December 9th and beat the market again by 5.1 percentage points. Unfortunately PRG wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on PRG were disappointed as the stock returned 0.2% since the end of September (through 12/9) 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 many of these stocks already outperformed the market since 2019.
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Disclosure: None. This article was originally published at Insider Monkey.
