Most investors tend to think that hedge funds and other asset managers are worthless, as they cannot beat even simple index fund portfolios. In fact, most people expect hedge funds to compete with and outperform the bull market that we have witnessed in recent years. However, hedge funds are generally partially hedged and aim at delivering attractive risk-adjusted returns rather than following the ups and downs of equity markets hoping that they will outperform the broader market. Our research shows that certain hedge funds do have great stock picking skills (and we can identify these hedge funds in advance pretty accurately), so let’s take a glance at the smart money sentiment towards PFSweb, Inc. (NASDAQ:PFSW).
Is PFSweb, Inc. (NASDAQ:PFSW) a superb investment today? Money managers were taking a bearish view. The number of long hedge fund positions fell by 1 in recent months. PFSweb, Inc. (NASDAQ:PFSW) was in 6 hedge funds’ portfolios at the end of March. The all time high for this statistic is 12. Our calculations also showed that PFSW 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.
Peter Rathjens of Arrowstreet Capital
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, an activist hedge fund owns nearly 40% of this $24 biotech stock and is trying to buy the rest for around $50. So, we recommended a long position to our monthly premium newsletter subscribers. 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. Keeping this in mind we’re going to review the latest hedge fund action regarding PFSweb, Inc. (NASDAQ:PFSW).
Do Hedge Funds Think PFSW Is A Good Stock To Buy Now?
Heading into the second quarter of 2021, a total of 6 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -14% from the fourth quarter of 2020. On the other hand, there were a total of 5 hedge funds with a bullish position in PFSW a year ago. With the smart money’s positions undergoing their usual ebb and flow, there exists an “upper tier” of key hedge fund managers who were upping their holdings substantially (or already accumulated large positions).
The largest stake in PFSweb, Inc. (NASDAQ:PFSW) was held by Portolan Capital Management, which reported holding $9.7 million worth of stock at the end of December. It was followed by Renaissance Technologies with a $5.3 million position. Other investors bullish on the company included North Run Capital, Arrowstreet Capital, and Two Sigma Advisors. In terms of the portfolio weights assigned to each position North Run Capital allocated the biggest weight to PFSweb, Inc. (NASDAQ:PFSW), around 3% of its 13F portfolio. Portolan Capital Management is also relatively very bullish on the stock, designating 0.76 percent of its 13F equity portfolio to PFSW.
Judging by the fact that PFSweb, Inc. (NASDAQ:PFSW) has experienced a decline in interest from the entirety of the hedge funds we track, logic holds that there were a few hedge funds who were dropping their entire stakes last quarter. It’s worth mentioning that Mark Broach’s Manatuck Hill Partners said goodbye to the largest position of all the hedgies followed by Insider Monkey, valued at close to $0.3 million in stock, and Israel Englander’s Millennium Management was right behind this move, as the fund dumped about $0.1 million worth. These moves are interesting, as total hedge fund interest dropped by 1 funds last quarter.
Let’s go over hedge fund activity in other stocks similar to PFSweb, Inc. (NASDAQ:PFSW). We will take a look at Brainstorm Cell Therapeutics Inc. (NASDAQ:BCLI), Auburn National Bancorporation, Inc. (NASDAQ:AUBN), Franklin Financial Services Corporation (NASDAQ:FRAF), KLX Energy Services Holdings, Inc. (NASDAQ:KLXE), Citizens Community Bancorp Inc. (NASDAQ:CZWI), GasLog Partners LP (NYSE:GLOP), and SB Financial Group, Inc. (NASDAQ:SBFG). This group of stocks’ market caps match PFSW’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| BCLI | 5 | 2305 | -2 |
| AUBN | 1 | 585 | 0 |
| FRAF | 2 | 1474 | 2 |
| KLXE | 5 | 2474 | -1 |
| CZWI | 4 | 15388 | -1 |
| GLOP | 8 | 8765 | 3 |
| SBFG | 3 | 10143 | 1 |
| Average | 4 | 5876 | 0.3 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 4 hedge funds with bullish positions and the average amount invested in these stocks was $6 million. That figure was $20 million in PFSW’s case. GasLog Partners LP (NYSE:GLOP) is the most popular stock in this table. On the other hand Auburn National Bancorporation, Inc. (NASDAQ:AUBN) is the least popular one with only 1 bullish hedge fund positions. PFSweb, Inc. (NASDAQ:PFSW) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for PFSW is 54.7. 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. 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 19.3% in 2021 through June 25th and still beat the market by 4.8 percentage points. Hedge funds were also right about betting on PFSW, though not to the same extent, as the stock returned 13% since Q1 (through June 25th) and outperformed the market as well.
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Disclosure: None. This article was originally published at Insider Monkey.
