We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (see why hell is coming).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. Insider Monkey finished processing 835 13F filings submitted by hedge funds and prominent investors. These filings show these funds’ portfolio positions as of December 31st, 2019. What do these smart investors think about PRA Group, Inc. (NASDAQ:PRAA)?
PRA Group, Inc. (NASDAQ:PRAA) was in 12 hedge funds’ portfolios at the end of December. PRAA investors should pay attention to an increase in hedge fund interest lately. There were 11 hedge funds in our database with PRAA holdings at the end of the previous quarter. Our calculations also showed that PRAA isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).
In the eyes of most stock holders, hedge funds are perceived as unimportant, old investment tools of years past. While there are more than 8000 funds trading today, Our researchers look at the upper echelon of this club, about 850 funds. These money managers orchestrate most of all hedge funds’ total capital, and by observing their top stock picks, Insider Monkey has come up with many investment strategies that have historically defeated the broader indices. Insider Monkey’s flagship short hedge fund strategy beat the S&P 500 short ETFs by around 20 percentage points per year since its inception in March 2017. Our portfolio of short stocks lost 35.3% since February 2017 (through March 3rd) even though the market was up more than 35% during the same period. We just shared a list of 7 short targets in our latest quarterly update .
David E. Shaw of D.E. Shaw
We leave no stone unturned when looking for the next great investment idea. For example, Federal Reserve and other Central Banks are tripping over each other to print more money. As a result, we believe gold stocks will outperform fixed income ETFs in the long-term. So we are checking out investment opportunities like this one. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind let’s take a gander at the new hedge fund action regarding PRA Group, Inc. (NASDAQ:PRAA).
How are hedge funds trading PRA Group, Inc. (NASDAQ:PRAA)?
At the end of the fourth quarter, a total of 12 of the hedge funds tracked by Insider Monkey were long this stock, a change of 9% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in PRAA over the last 18 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in PRA Group, Inc. (NASDAQ:PRAA) was held by D E Shaw, which reported holding $21.5 million worth of stock at the end of September. It was followed by Water Street Capital with a $8.2 million position. Other investors bullish on the company included Renaissance Technologies, Intrinsic Edge Capital, and Citadel Investment Group. In terms of the portfolio weights assigned to each position Water Street Capital allocated the biggest weight to PRA Group, Inc. (NASDAQ:PRAA), around 0.7% of its 13F portfolio. Intrinsic Edge Capital is also relatively very bullish on the stock, dishing out 0.56 percent of its 13F equity portfolio to PRAA.
As one would reasonably expect, key hedge funds have jumped into PRA Group, Inc. (NASDAQ:PRAA) headfirst. Intrinsic Edge Capital, managed by Mark Coe, initiated the most valuable position in PRA Group, Inc. (NASDAQ:PRAA). Intrinsic Edge Capital had $4.4 million invested in the company at the end of the quarter. Brandon Haley’s Holocene Advisors also made a $1.1 million investment in the stock during the quarter. The following funds were also among the new PRAA investors: Matthew Hulsizer’s PEAK6 Capital Management and Gavin Saitowitz and Cisco J. del Valle’s Springbok Capital.
Let’s now take a look at hedge fund activity in other stocks similar to PRA Group, Inc. (NASDAQ:PRAA). We will take a look at Rush Enterprises, Inc. (NASDAQ:RUSHB), Berkshire Hills Bancorp, Inc. (NYSE:BHLB), National Research Corporation (NASDAQ:NRC), and Kite Realty Group Trust (NYSE:KRG). This group of stocks’ market valuations are similar to PRAA’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| RUSHB | 4 | 41101 | 1 |
| BHLB | 9 | 41712 | -3 |
| NRC | 9 | 54049 | -1 |
| KRG | 13 | 81500 | 2 |
| Average | 8.75 | 54591 | -0.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 8.75 hedge funds with bullish positions and the average amount invested in these stocks was $55 million. That figure was $49 million in PRAA’s case. Kite Realty Group Trust (NYSE:KRG) is the most popular stock in this table. On the other hand Rush Enterprises, Inc. (NASDAQ:RUSHB) is the least popular one with only 4 bullish hedge fund positions. PRA Group, Inc. (NASDAQ:PRAA) 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. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 13.0% in 2020 through April 6th but beat the market by 4.2 percentage points. Unfortunately PRAA wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on PRAA were disappointed as the stock returned -36.6% during the same time period 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 this year.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
