Were These Hedge Funds Right About Perrigo Company (PRGO)?

Before we spend countless hours researching a company, we like to analyze what insiders, hedge funds and billionaire investors think of the stock first. This is a necessary first step in our investment process because our research has shown that the elite investors’ consensus returns have been exceptional. In the following paragraphs, we find out what the billionaire investors and hedge funds think of Perrigo Company (NASDAQ:PRGO).

Is Perrigo Company (NASDAQ:PRGO) the right investment to pursue these days? The smart money was getting more bullish. The number of long hedge fund bets rose by 5 recently. Perrigo Company (NASDAQ:PRGO) was in 33 hedge funds’ portfolios at the end of June. The all time high for this statistics is 63. Our calculations also showed that PRGO isn’t among the 30 most popular stocks among hedge funds (click for Q2 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.

To most investors, hedge funds are perceived as unimportant, old financial tools of years past. While there are over 8000 funds with their doors open at present, We look at the elite of this club, about 850 funds. These hedge fund managers handle most of the hedge fund industry’s total asset base, and by tailing their matchless investments, Insider Monkey has come up with various investment strategies that have historically outrun Mr. Market. Insider Monkey’s flagship short hedge fund strategy outperformed the S&P 500 short ETFs by around 20 percentage points annually since its inception in March 2017. Our portfolio of short stocks lost 34% since February 2017 (through August 17th) even though the market was up 53% during the same period. We just shared a list of 8 short targets in our latest quarterly update .

Ric Dillon of Diamond Hill Capital

At Insider Monkey we scour multiple sources to uncover the next great investment idea. Last week, most investors overlooked a major development because of the presidential elections: Oregon became the first state to legalize psychedelic mushrooms which are shown to have promising results in treating depression, addiction, and PTSD in early stage academic studies. So, we are checking out this psychedelic drug stock idea right now. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. 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 website to get excerpts of these letters in your inbox. With all of this in mind we’re going to view the fresh hedge fund action regarding Perrigo Company (NASDAQ:PRGO).

How have hedgies been trading Perrigo Company (NASDAQ:PRGO)?

At Q2’s end, a total of 33 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 18% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards PRGO over the last 20 quarters. With hedgies’ sentiment swirling, there exists a few notable hedge fund managers who were upping their holdings substantially (or already accumulated large positions).

More specifically, Camber Capital Management was the largest shareholder of Perrigo Company (NASDAQ:PRGO), with a stake worth $124.4 million reported as of the end of June. Trailing Camber Capital Management was Citadel Investment Group, which amassed a stake valued at $84.5 million. Diamond Hill Capital, Tamarack Capital Management, and Two Sigma Advisors 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 Tamarack Capital Management allocated the biggest weight to Perrigo Company (NASDAQ:PRGO), around 7.31% of its 13F portfolio. Camber Capital Management is also relatively very bullish on the stock, dishing out 7.11 percent of its 13F equity portfolio to PRGO.

As one would reasonably expect, some big names have been driving this bullishness. Sphera Global Healthcare Fund, managed by Doron Breen and Mori Arkin, assembled the biggest position in Perrigo Company (NASDAQ:PRGO). Sphera Global Healthcare Fund had $2.8 million invested in the company at the end of the quarter. D. E. Shaw’s D E Shaw also initiated a $2.7 million position during the quarter. The other funds with brand new PRGO positions are  Renaissance Technologies, Greg Poole’s Echo Street Capital Management, and Jerome Pfund and Michael Sjostrom’s Sectoral Asset Management.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Perrigo Company (NASDAQ:PRGO) but similarly valued. These stocks are GCI Liberty, Inc. (NASDAQ:GLIBA), Snap-on Incorporated (NYSE:SNA), Trex Company, Inc. (NYSE:TREX), Iron Mountain Incorporated (NYSE:IRM), Textron Inc. (NYSE:TXT), The Scotts Miracle-Gro Company (NYSE:SMG), and Molson Coors Beverage Company (NYSE:TAP). All of these stocks’ market caps resemble PRGO’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 30.4 hedge funds with bullish positions and the average amount invested in these stocks was $525 million. That figure was $447 million in PRGO’s case. GCI Liberty, Inc. (NASDAQ:GLIBA) is the most popular stock in this table. On the other hand Snap-on Incorporated (NYSE:SNA) is the least popular one with only 20 bullish hedge fund positions. Perrigo Company (NASDAQ:PRGO) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for PRGO is 45.4. 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 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 gained 23% in 2020 through October 30th and beat the market again by 20.1 percentage points. Unfortunately PRGO wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on PRGO were disappointed as the stock returned -20.3% since the end of June (through 10/30) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.

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