Should I Buy Paysafe Limited (PSFE)?

As we already know from media reports and hedge fund investor letters, hedge funds delivered their best returns in a decade. Most investors who decided to stick with hedge funds after a rough 2018 recouped their losses by the end of the fourth quarter of 2019. A significant number of hedge funds continued their strong performance in 2020 and 2021 as well. We get to see hedge funds’ thoughts towards the market and individual stocks by aggregating their quarterly portfolio movements and reading their investor letters. In this article, we will particularly take a look at what hedge funds think about Paysafe Limited (NYSE:PSFE).

Is Paysafe Limited (NYSE:PSFE) ready to rally soon? Hedge funds were in an optimistic mood. The number of long hedge fund bets rose by 41 recently. Paysafe Limited (NYSE:PSFE) was in 41 hedge funds’ portfolios at the end of March. Our calculations also showed that PSFE isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).

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. Hedge funds have more than $3.5 trillion in assets under management, so you can’t expect their entire portfolios to beat the market by large margins. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 115 percentage points since March 2017 (see the details here). So you can still find a lot of gems by following hedge funds’ moves today.

Dan Loeb of Third Point

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation, which is why we are checking out this inflation play. We go through lists like 10 best gold stocks to buy to identify promising stocks. 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. With all of this in mind let’s go over the key hedge fund action regarding Paysafe Limited (NYSE:PSFE).

Do Hedge Funds Think PSFE Is A Good Stock To Buy Now?

Heading into the second quarter of 2021, a total of 41 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 41 from one quarter earlier. The graph below displays the number of hedge funds with bullish position in PSFE over the last 23 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, Third Point was the largest shareholder of Paysafe Limited (NYSE:PSFE), with a stake worth $560.3 million reported as of the end of March. Trailing Third Point was Suvretta Capital Management, which amassed a stake valued at $175.5 million. Appaloosa Management LP, Alua Capital Management, and TOMS Capital were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position TOMS Capital allocated the biggest weight to Paysafe Limited (NYSE:PSFE), around 3.87% of its 13F portfolio. Alua Capital Management is also relatively very bullish on the stock, dishing out 3.84 percent of its 13F equity portfolio to PSFE.

As one would reasonably expect, specific money managers have been driving this bullishness. Third Point, managed by Dan Loeb, initiated the biggest position in Paysafe Limited (NYSE:PSFE). Third Point had $560.3 million invested in the company at the end of the quarter. Aaron Cowen’s Suvretta Capital Management also made a $175.5 million investment in the stock during the quarter. The following funds were also among the new PSFE investors: David Tepper’s Appaloosa Management LP, Tom Purcell and Marco Tablada’s Alua Capital Management, and Benjamin Pass’s TOMS Capital.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Paysafe Limited (NYSE:PSFE) but similarly valued. We will take a look at Western Alliance Bancorporation (NYSE:WAL), McAfee Corp. (NASDAQ:MCFE), ContextLogic Inc. (NASDAQ:WISH), Bruker Corporation (NASDAQ:BRKR), Arrival (NASDAQ:ARVL), CF Industries Holdings, Inc. (NYSE:CF), and Americold Realty Trust (NYSE:COLD). This group of stocks’ market values match PSFE’s market value.

View table here if you experience formatting issues.

As you can see these stocks had an average of 23 hedge funds with bullish positions and the average amount invested in these stocks was $383 million. That figure was $1326 million in PSFE’s case. CF Industries Holdings, Inc. (NYSE:CF) is the most popular stock in this table. On the other hand Arrival (NASDAQ:ARVL) is the least popular one with only 14 bullish hedge fund positions. Paysafe Limited (NYSE:PSFE) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for PSFE is 82. 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. 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 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 17.4% in 2021 through June 18th and beat the market again by 6.1 percentage points. Unfortunately PSFE wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on PSFE were disappointed as the stock returned -16.7% since the end of March (through 6/18) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.

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