Out of thousands of stocks that are currently traded on the market, it is difficult to identify those that will really generate strong returns. Hedge funds and institutional investors spend millions of dollars on analysts with MBAs and PhDs, who are industry experts and well connected to other industry and media insiders on top of that. Individual investors can piggyback the hedge funds employing these talents and can benefit from their vast resources and knowledge in that way. We analyze quarterly 13F filings of nearly 900 hedge funds and, by looking at the smart money sentiment that surrounds a stock, we can determine whether it has the potential to beat the market over the long-term. Therefore, let’s take a closer look at what smart money thinks about PureCycle Technologies, Inc. (NASDAQ:PCT).
Is PCT a good stock to buy? The smart money was getting more bullish. The number of long hedge fund positions improved by 21 lately. PureCycle Technologies, Inc. (NASDAQ:PCT) was in 21 hedge funds’ portfolios at the end of the first quarter of 2021. Our calculations also showed that PCT isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 206.8% since March 2017 and outperformed the S&P 500 ETFs by more than 115 percentage points (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Robert Pohly of Samlyn Capital
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, Chuck Schumer recently stated that marijuana legalization will be a Senate priority. So, we are checking out this under the radar stock that will benefit from this. We go through lists like the 10 best battery 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. 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 homepage. With all of this in mind let’s take a look at the key hedge fund action regarding PureCycle Technologies, Inc. (NASDAQ:PCT).
Do Hedge Funds Think PCT Is A Good Stock To Buy Now?
At the end of the first quarter, a total of 21 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 21 from the fourth quarter of 2020. Below, you can check out the change in hedge fund sentiment towards PCT over the last 23 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Sylebra Capital Management was the largest shareholder of PureCycle Technologies, Inc. (NASDAQ:PCT), with a stake worth $438.2 million reported as of the end of March. Trailing Sylebra Capital Management was Samlyn Capital, which amassed a stake valued at $83.8 million. Harvard Management Co, Atalan Capital, and Encompass Capital Advisors 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 Sylebra Capital Management allocated the biggest weight to PureCycle Technologies, Inc. (NASDAQ:PCT), around 11.32% of its 13F portfolio. Cartenna Capital is also relatively very bullish on the stock, dishing out 3.28 percent of its 13F equity portfolio to PCT.
As one would reasonably expect, key money managers were leading the bulls’ herd. Sylebra Capital Management, managed by Daniel Patrick Gibson, established the largest position in PureCycle Technologies, Inc. (NASDAQ:PCT). Sylebra Capital Management had $438.2 million invested in the company at the end of the quarter. Robert Pohly’s Samlyn Capital also initiated a $83.8 million position during the quarter. The following funds were also among the new PCT investors: Rick Slocum’s Harvard Management Co, David Thomas’s Atalan Capital, and Todd J. Kantor’s Encompass Capital Advisors.
Let’s go over hedge fund activity in other stocks similar to PureCycle Technologies, Inc. (NASDAQ:PCT). We will take a look at American Equity Investment Life Holding Company (NYSE:AEL), Tower Semiconductor Ltd. (NASDAQ:TSEM), Trupanion Inc (NYSE:TRUP), CVB Financial Corp. (NASDAQ:CVBF), Focus Financial Partners Inc. (NASDAQ:FOCS), Verint Systems Inc. (NASDAQ:VRNT), and AtriCure Inc. (NASDAQ:ATRC). This group of stocks’ market values resemble PCT’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| AEL | 24 | 262302 | 1 |
| TSEM | 19 | 389665 | 2 |
| TRUP | 17 | 209492 | -1 |
| CVBF | 13 | 40237 | 2 |
| FOCS | 23 | 108921 | 14 |
| VRNT | 26 | 526980 | 6 |
| ATRC | 14 | 196084 | -7 |
| Average | 19.4 | 247669 | 2.4 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 19.4 hedge funds with bullish positions and the average amount invested in these stocks was $248 million. That figure was $659 million in PCT’s case. Verint Systems Inc. (NASDAQ:VRNT) is the most popular stock in this table. On the other hand CVB Financial Corp. (NASDAQ:CVBF) is the least popular one with only 13 bullish hedge fund positions. PureCycle Technologies, Inc. (NASDAQ:PCT) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for PCT is 59.2. 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 23.8% in 2021 through July 16th and beat the market again by 7.7 percentage points. Unfortunately PCT wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on PCT were disappointed as the stock returned -37.9% since the end of March (through 7/16) 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.
