PTC Inc (PTC): Are Hedge Funds Right About This Stock?

We at Insider Monkey have gone over 821 13F filings that hedge funds and prominent investors are required to file by the SEC The 13F filings show the funds’ and investors’ portfolio positions as of March 31st, near the height of the coronavirus market crash. In this article, we look at what those funds think of PTC Inc (NASDAQ:PTC) based on that data.

Hedge fund interest in PTC Inc (NASDAQ:PTC) shares was flat at the end of last quarter. This is usually a negative indicator. 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 Algonquin Power & Utilities Corp. (NYSE:AQN), Lennox International Inc. (NYSE:LII), and Arconic Inc. (NYSE:ARNC) to gather more data points. Our calculations also showed that PTC isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).

Video: Watch our video about the top 5 most popular hedge fund stocks.

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 51 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.

Michael Lowenstein of Kensico Capital

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out trades like this one. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. 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 the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind let’s take a look at the new hedge fund action surrounding PTC Inc (NASDAQ:PTC).

How are hedge funds trading PTC Inc (NASDAQ:PTC)?

At the end of the first quarter, a total of 35 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from the fourth quarter of 2019. The graph below displays the number of hedge funds with bullish position in PTC over the last 18 quarters. With hedge funds’ sentiment swirling, there exists an “upper tier” of notable hedge fund managers who were adding to their holdings meaningfully (or already accumulated large positions).

Of the funds tracked by Insider Monkey, 40 North Management, managed by David S. Winter and David J. Millstone, holds the largest position in PTC Inc (NASDAQ:PTC). 40 North Management has a $250.5 million position in the stock, comprising 15.2% of its 13F portfolio. The second most bullish fund manager is Select Equity Group, led by Robert Joseph Caruso, holding a $189.9 million position; the fund has 1.3% of its 13F portfolio invested in the stock. Some other peers that hold long positions comprise Kevin Oram and Peter Uddo’s Praesidium Investment Management Company, Ian Simm’s Impax Asset Management and Michael Lowenstein’s Kensico Capital. In terms of the portfolio weights assigned to each position StackLine Partners allocated the biggest weight to PTC Inc (NASDAQ:PTC), around 17.07% of its 13F portfolio. 40 North Management is also relatively very bullish on the stock, setting aside 15.25 percent of its 13F equity portfolio to PTC.

Judging by the fact that PTC Inc (NASDAQ:PTC) has faced a decline in interest from the aggregate hedge fund industry, we can see that there lies a certain “tier” of funds that elected to cut their positions entirely last quarter. Interestingly, David Goel and Paul Ferri’s Matrix Capital Management dropped the biggest position of the 750 funds monitored by Insider Monkey, worth about $43.6 million in stock, and Renaissance Technologies was right behind this move, as the fund dropped about $25.2 million worth. These bearish behaviors are interesting, as total hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s now take a look at hedge fund activity in other stocks similar to PTC Inc (NASDAQ:PTC). These stocks are Algonquin Power & Utilities Corp. (NYSE:AQN), Lennox International Inc. (NYSE:LII), Arconic Inc. (NYSE:ARNC), and Carlisle Companies, Inc. (NYSE:CSL). This group of stocks’ market caps match PTC’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 20.75 hedge funds with bullish positions and the average amount invested in these stocks was $607 million. That figure was $1182 million in PTC’s case. Arconic Inc. (NYSE:ARNC) is the most popular stock in this table. On the other hand Algonquin Power & Utilities Corp. (NYSE:AQN) is the least popular one with only 14 bullish hedge fund positions. Compared to these stocks PTC Inc (NASDAQ:PTC) is more popular among hedge funds. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks returned 8.3% in 2020 through the end of May but still managed to beat the market by 13.2 percentage points. Hedge funds were also right about betting on PTC as the stock returned 24.8% so far in Q2 (through the end of May) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.

Disclosure: None. This article was originally published at Insider Monkey.