Is Prospect Capital Corporation (PSEC) A Good Stock To Buy?

Judging by the fact that Prospect Capital Corporation (NASDAQ:PSEC) has faced declining sentiment from the aggregate hedge fund industry, it’s safe to say that there was a specific group of money managers who sold off their entire stakes in the third quarter. Intriguingly, Peter Muller’s PDT Partners dropped the largest investment of the “upper crust” of funds watched by Insider Monkey, valued at close to $1.7 million in stock. Paul Tudor Jones’ fund, Tudor Investment Corp, also sold off its stock, about $0.7 million worth. These transactions are interesting, as total hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Prospect Capital Corporation (NASDAQ:PSEC) but similarly valued. These stocks are Ryman Hospitality Properties, Inc. (REIT) (NYSE:RHP), MFA Financial, Inc. (NYSE:MFA), Sunoco LP (NYSE:SUN), and Golar LNG Limited (USA) (NASDAQ:GLNG). All of these stocks’ market caps are similar to PSEC’s market cap.

As you can see these stocks had an average of 21 hedge funds with bullish positions and the average amount invested in these stocks was $312 million, compared to just $28 million in PSEC’s case. Golar LNG Limited (USA) (NASDAQ:GLNG) is the most popular stock in this table and Sunoco LP (NYSE:SUN) is the least popular one with only 10 bullish hedge fund positions. Prospect Capital Corporation (NASDAQ:PSEC) 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. In this regard GLNG might be a better candidate to consider a long position.