Legendary investors such as Leon Cooperman and Seth Klarman earn enormous amounts of money for themselves and their investors by doing in-depth research on small-cap stocks that big brokerage houses don’t publish. Small cap stocks -especially when they are screened well- can generate substantial outperformance versus a boring index fund. That’s why we analyze the activity of those successful funds in these small-cap stocks. In the following paragraphs, we analyze Pace Holdings Corp (NASDAQ:PACE) from the perspective of those successful funds.
Pace Holdings Corp (NASDAQ:PACE) shares didn’t see a lot of action during the third quarter. Overall, hedge fund sentiment was unchanged. The stock was in 20 hedge funds’ portfolios at the end of September. At the end of this article we will also compare PACE to other stocks including Vera Bradley, Inc. (NASDAQ:VRA), Nanometrics Incorporated (NASDAQ:NANO), and PDL BioPharma Inc. (NASDAQ:PDLI) to get a better sense of its popularity.
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We follow over 700 hedge funds and other institutional investors and by analyzing their quarterly 13F filings, we identify stocks that they are collectively bullish on and develop investment strategies based on this data. One strategy that outperformed the market over the last year involves selecting the 100 best-performing funds and identifying the 30 mid-cap stocks that they are collectively most bullish on. Over the past year, this strategy generated returns of 18%, topping the 8% gain registered by S&P 500 ETFs. We launched this strategy 2.5 years ago and it returned more than 39% since then, vs. 22% gain registered by the S&P 500 ETFs.
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What does the smart money think about Pace Holdings Corp (NASDAQ:PACE)?
Heading into the fourth quarter of 2016, a total of 20 of the hedge funds tracked by Insider Monkey were bullish on this stock, unchanged from one quarter earlier. On the other hand, there were a total of 21 hedge funds with a bullish position in PACE at the beginning of this year. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Of the funds tracked by Insider Monkey, Glenn Russell Dubin’s Highbridge Capital Management has the most valuable position in Pace Holdings Corp (NASDAQ:PACE), worth close to $32.2 million. On Highbridge Capital Management’s heels is Nick Niell of Arrowgrass Capital Partners, with a $25.6 million position. Some other hedge funds and institutional investors with similar optimism consist of Isaac Corre’s Governors Lane, and Anand Parekh’s Alyeska Investment Group. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.
Now that we’ve mentioned the most bullish investors, let’s also take a look at some funds that sold off their entire stakes in the stock during the third quarter. At the top of the heap, Jamie Mendola’s Pacific Grove Capital sold off the biggest investment of all the investors tracked by Insider Monkey, comprising about $6 million in stock. Sander Gerber’s fund, Hudson Bay Capital Management, also dumped its stock, about $1.5 million worth.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Pace Holdings Corp (NASDAQ:PACE) but similarly valued. These stocks are Vera Bradley, Inc. (NASDAQ:VRA), Nanometrics Incorporated (NASDAQ:NANO), PDL BioPharma Inc. (NASDAQ:PDLI), and Inteliquent (NASDAQ:IQNT). This group of stocks’ market caps are closest to PACE’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| VRA | 16 | 111913 | 0 |
| NANO | 15 | 75248 | -1 |
| PDLI | 20 | 81412 | 6 |
| IQNT | 13 | 82690 | 2 |
As you can see these stocks had an average of 16 hedge funds with bullish positions and the average amount invested in these stocks was $88 million. That figure was $235 million in PACE’s case. PDL BioPharma Inc. (NASDAQ:PDLI) is the most popular stock in this table. On the other hand Inteliquent (NASDAQ:IQNT) is the least popular one with only 13 bullish hedge fund positions. Pace Holdings Corp (NASDAQ:PACE) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. In this regard PDLI might be a better candidate to consider taking a long position in.
Disclosure: None