Hedge funds are not perfect. They have their bad picks just like everyone else. Facebook, a stock hedge funds have loved dearly, lost nearly 40% of its value at one point in 2018. Although hedge funds are not perfect, their consensus picks do deliver solid returns, however. Our data show the top 20 S&P 500 stocks among hedge funds beat the S&P 500 Index by 4 percentage points so far in 2019. Because hedge funds have a lot of resources and their consensus picks do well, we pay attention to what they think. In this article, we analyze what the elite funds think of The Providence Service Corporation (NASDAQ:PRSC).
The Providence Service Corporation (NASDAQ:PRSC) investors should be aware of an increase in support from the world’s most elite money managers of late. Our calculations also showed that PRSC isn’t among the 30 most popular stocks among hedge funds (see the video below).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 market by 40 percentage points since May 2014 through May 30, 2019 (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. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in our short portfolio.
Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. Let’s take a look at the key hedge fund action surrounding The Providence Service Corporation (NASDAQ:PRSC).
Hedge fund activity in The Providence Service Corporation (NASDAQ:PRSC)
At Q2’s end, a total of 14 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 17% from one quarter earlier. By comparison, 13 hedge funds held shares or bullish call options in PRSC a year ago. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in The Providence Service Corporation (NASDAQ:PRSC) was held by Coliseum Capital, which reported holding $70.2 million worth of stock at the end of March. It was followed by Renaissance Technologies with a $52 million position. Other investors bullish on the company included Cardinal Capital, Alta Fundamental Advisers, and Millennium Management.
Consequently, specific money managers have jumped into The Providence Service Corporation (NASDAQ:PRSC) headfirst. Marshall Wace LLP, managed by Paul Marshall and Ian Wace, created the largest position in The Providence Service Corporation (NASDAQ:PRSC). Marshall Wace LLP had $2 million invested in the company at the end of the quarter. Chuck Royce’s Royce & Associates also initiated a $1.3 million position during the quarter. The only other fund with a new position in the stock is Mike Vranos’s Ellington.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as The Providence Service Corporation (NASDAQ:PRSC) but similarly valued. These stocks are Modine Manufacturing Company (NYSE:MOD), ADTRAN, Inc. (NASDAQ:ADTN), Adverum Biotechnologies, Inc. (NASDAQ:ADVM), and UroGen Pharma Ltd. (NASDAQ:URGN). All of these stocks’ market caps match PRSC’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| MOD | 20 | 78255 | 3 |
| ADTN | 13 | 85342 | -2 |
| ADVM | 15 | 173801 | 3 |
| URGN | 12 | 146685 | -5 |
| Average | 15 | 121021 | -0.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 15 hedge funds with bullish positions and the average amount invested in these stocks was $121 million. That figure was $163 million in PRSC’s case. Modine Manufacturing Company (NYSE:MOD) is the most popular stock in this table. On the other hand UroGen Pharma Ltd. (NASDAQ:URGN) is the least popular one with only 12 bullish hedge fund positions. The Providence Service Corporation (NASDAQ:PRSC) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. A small number of hedge funds were also right about betting on PRSC, though not to the same extent, as the stock returned 3.7% during the third quarter and outperformed the market.
Disclosure: None. This article was originally published at Insider Monkey.
