At Insider Monkey we track the activity of some of the best-performing hedge funds like Appaloosa Management, Baupost, and Tiger Global because we determined that some of the stocks that they are collectively bullish on can help us generate returns above the broader indices. Out of thousands of stocks that hedge funds invest in, small-caps can provide the best returns over the long term due to the fact that these companies are less efficiently priced and are usually under the radars of mass-media, analysts and dumb money. This is why we follow the smart money moves in the small-cap space.
Is PTC Inc (NASDAQ:PTC) a great investment now? Prominent investors are in a bearish mood. The number of bullish hedge fund positions fell by 2 lately. Our calculations also showed that PTC isn’t among the 30 most popular stocks among hedge funds (see the video below). PTC was in 23 hedge funds’ portfolios at the end of the second quarter of 2019. There were 25 hedge funds in our database with PTC positions at the end of the previous quarter.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
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’ 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 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 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.
Unlike this former hedge fund manager who is convinced Dow will soar past 40000, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. We’re going to view the recent hedge fund action regarding PTC Inc (NASDAQ:PTC).
What does smart money think about PTC Inc (NASDAQ:PTC)?
At Q2’s end, a total of 23 of the hedge funds tracked by Insider Monkey were long this stock, a change of -8% from one quarter earlier. By comparison, 40 hedge funds held shares or bullish call options in PTC a year ago. With the smart money’s sentiment swirling, there exists an “upper tier” of notable hedge fund managers who were upping their stakes considerably (or already accumulated large positions).
According to Insider Monkey’s hedge fund database, OZ Management has the largest position in PTC Inc (NASDAQ:PTC), worth close to $223.1 million, comprising 1.2% of its total 13F portfolio. On OZ Management’s heels is Select Equity Group, led by Robert Joseph Caruso, holding a $217.8 million position; the fund has 1.5% of its 13F portfolio invested in the stock. Other peers that hold long positions comprise Kevin Oram and Peter Uddo’s Praesidium Investment Management Company, Ian Simm’s Impax Asset Management and David Gallo’s Valinor Management LLC.
Seeing as PTC Inc (NASDAQ:PTC) has experienced bearish sentiment from the smart money, it’s easy to see that there exists a select few hedgies that elected to cut their entire stakes by the end of the second quarter. It’s worth mentioning that Andrew Immerman and Jeremy Schiffman’s Palestra Capital Management dumped the largest stake of the 750 funds tracked by Insider Monkey, worth an estimated $72.4 million in stock. Benjamin A. Smith’s fund, Laurion Capital Management, also said goodbye to its stock, about $64.2 million worth. These transactions are interesting, as total hedge fund interest was cut by 2 funds by the end of the second quarter.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as PTC Inc (NASDAQ:PTC) but similarly valued. These stocks are The Trade Desk, Inc. (NASDAQ:TTD), Noble Energy, Inc. (NYSE:NBL), Array Biopharma Inc (NASDAQ:ARRY), and United Rentals, Inc. (NYSE:URI). This group of stocks’ market caps resemble PTC’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| TTD | 24 | 348201 | -1 |
| NBL | 25 | 808173 | 1 |
| ARRY | 58 | 3051915 | 26 |
| URI | 44 | 1043608 | -1 |
| Average | 37.75 | 1312974 | 6.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 37.75 hedge funds with bullish positions and the average amount invested in these stocks was $1313 million. That figure was $1197 million in PTC’s case. Array Biopharma Inc (NASDAQ:ARRY) is the most popular stock in this table. On the other hand The Trade Desk, Inc. (NASDAQ:TTD) is the least popular one with only 24 bullish hedge fund positions. Compared to these stocks PTC Inc (NASDAQ:PTC) is even less popular than TTD. Hedge funds dodged a bullet by taking a bearish stance towards PTC. Our calculations showed that the top 20 most popular hedge fund stocks returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately PTC wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); PTC investors were disappointed as the stock returned -24% during the third quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far in 2019.
Disclosure: None. This article was originally published at Insider Monkey.
