Pra Group Inc (PRAA): Are Hedge Funds Right About This Stock?

Amid an overall market correction, many stocks that smart money investors were collectively bullish on tanked during the third quarter. Among them, Valeant and Micron ranked among the top 30 picks and both lost around 20%. Citigroup, which was the third most popular stock, lost 10% amid uncertainty regarding the interest rates. Nevertheless, our research shows that most of the stocks that smart money likes historically generate strong risk-adjusted returns. This is why following the smart money sentiment is a useful tool at identifying the next stock to invest in.

Pra Group Inc (NASDAQ:PRAA) has experienced a decrease in hedge fund interest recently. PRAA was in 16 hedge funds’ portfolios at the end of the third quarter of 2015. There were 18 hedge funds in our database with PRAA positions at the end of the previous quarter. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Helen of Troy Limited (NASDAQ:HELE), HomeAway, Inc. (NASDAQ:AWAY), and Impax Laboratories Inc (NASDAQ:IPXL) to gather more data points.

Now, we’re going to analyze the latest action regarding Pra Group Inc (NASDAQ:PRAA).

What have hedge funds been doing with Pra Group Inc (NASDAQ:PRAA)?

At Q3’s end, a total of 16 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -11% from the second quarter. With hedgies’ sentiment swirling, there exists an “upper tier” of key hedge fund managers who were boosting their stakes significantly (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, Jonathan Bloomberg’s BloombergSen has the most valuable position in Pra Group Inc (NASDAQ:PRAA), worth close to $122 million, accounting for 6.9% of its total 13F portfolio. Sitting at the No. 2 spot is Alyeska Investment Group, led by Anand Parekh, holding a $59.3 million position; 0.7% of its 13F portfolio is allocated to the stock. Other hedge funds and institutional investors that are bullish consist of Lee Munder’s Lee Munder Capital Group, Ken Griffin’s Citadel Investment Group and Bill Miller’s Legg Mason Capital Management.

Since Pra Group Inc (NASDAQ:PRAA) has experienced bearish sentiment from the entirety of the hedge funds we track, it’s easy to see that there was a specific group of hedgies who sold off their positions entirely by the end of the third quarter. At the top of the heap, Jim Simons’ Renaissance Technologies dumped the biggest position of all the hedgies monitored by Insider Monkey, comprising about $7.3 million in stock. Doug Gordon, Jon Hilsabeck and Don Jabro’s fund, Shellback Capital, also sold off its stock, about $5.3 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest fell by 2 funds by the end of the third quarter.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Pra Group Inc (NASDAQ:PRAA) but similarly valued. We will take a look at Helen of Troy Limited (NASDAQ:HELE), HomeAway, Inc. (NASDAQ:AWAY), Impax Laboratories Inc (NASDAQ:IPXL), and CST Brands Inc (NYSE:CST). This group of stocks’ market valuations are closest to PRAA’s market valuation.

As you can see these stocks had an average of 24.25 hedge funds with bullish positions and the average amount invested in these stocks was $480 million. That figure was $253 million in PRAA’s case. HomeAway, Inc. (NASDAQ:AWAY) is the most popular stock in this table. On the other hand Helen of Troy Limited (NASDAQ:HELE) is the least popular one with only 10 bullish hedge fund positions. Pra Group Inc (NASDAQ:PRAA) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard AWAY might be a better candidate to consider a long position.