We know that hedge funds generate strong, risk-adjusted returns over the long run, therefore imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, smart money investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do (like Melvin Capital’s recent GameStop losses). However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, as the current round of 13F filings has just ended, let’s examine the smart money sentiment towards Paysafe Limited (NYSE:PSFE).
Is Paysafe Limited (NYSE:PSFE) a bargain? The best stock pickers were in an optimistic mood. The number of bullish hedge fund positions improved by 9 lately. Paysafe Limited (NYSE:PSFE) was in 50 hedge funds’ portfolios at the end of June. The all time high for this statistic was previously 41. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that PSFE isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).
If you’d ask most shareholders, hedge funds are viewed as slow, old investment vehicles of years past. While there are over 8000 funds with their doors open at the moment, We hone in on the upper echelon of this club, around 850 funds. These money managers oversee most of the smart money’s total asset base, and by paying attention to their top investments, Insider Monkey has formulated various investment strategies that have historically beaten the market. Insider Monkey’s flagship short hedge fund strategy exceeded the S&P 500 short ETFs by around 20 percentage points per annum since its inception in March 2017. Also, our monthly newsletter’s portfolio of long stock picks returned 185.4% since March 2017 (through August 2021) and beat the S&P 500 Index by more than 79 percentage points. You can download a sample issue of this newsletter on our website .
Dan Loeb of Third Point
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. 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 take a glance at the recent hedge fund action encompassing Paysafe Limited (NYSE:PSFE).
Do Hedge Funds Think PSFE Is A Good Stock To Buy Now?
At the end of June, a total of 50 of the hedge funds tracked by Insider Monkey were long this stock, a change of 22% from one quarter earlier. By comparison, 0 hedge funds held shares or bullish call options in PSFE a year ago. With hedge funds’ positions undergoing their usual ebb and flow, there exists an “upper tier” of notable hedge fund managers who were boosting their stakes considerably (or already accumulated large positions).
More specifically, Third Point was the largest shareholder of Paysafe Limited (NYSE:PSFE), with a stake worth $502.6 million reported as of the end of June. Trailing Third Point was Suvretta Capital Management, which amassed a stake valued at $156.4 million. Appaloosa Management LP, Nitorum Capital, and Canyon Capital 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 Nitorum Capital allocated the biggest weight to Paysafe Limited (NYSE:PSFE), around 3.06% of its 13F portfolio. Third Point is also relatively very bullish on the stock, designating 2.94 percent of its 13F equity portfolio to PSFE.
As aggregate interest increased, some big names were leading the bulls’ herd. Nitorum Capital, managed by Seth Rosen, created the most outsized position in Paysafe Limited (NYSE:PSFE). Nitorum Capital had $67.2 million invested in the company at the end of the quarter. Ken Griffin’s Citadel Investment Group also made a $11.9 million investment in the stock during the quarter. The other funds with brand new PSFE positions are Paul Marshall and Ian Wace’s Marshall Wace LLP, Joe DiMenna’s ZWEIG DIMENNA PARTNERS, and Leon Shaulov’s Maplelane Capital.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Paysafe Limited (NYSE:PSFE) but similarly valued. These stocks are CyrusOne Inc (NASDAQ:CONE), Flex Ltd. (NASDAQ:FLEX), Commerce Bancshares, Inc. (NASDAQ:CBSH), Aegon N.V. (NYSE:AEG), West Fraser Timber Co. Ltd. (NYSE:WFG), Fiverr International Ltd. (NYSE:FVRR), and WEX Inc (NYSE:WEX). This group of stocks’ market caps are closest to PSFE’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CONE | 26 | 487917 | 5 |
| FLEX | 43 | 1463275 | -5 |
| CBSH | 16 | 75999 | 3 |
| AEG | 6 | 6164 | 0 |
| WFG | 25 | 591268 | 0 |
| FVRR | 30 | 465684 | 3 |
| WEX | 20 | 474265 | -6 |
| Average | 23.7 | 509225 | 0 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 23.7 hedge funds with bullish positions and the average amount invested in these stocks was $509 million. That figure was $1125 million in PSFE’s case. Flex Ltd. (NASDAQ:FLEX) is the most popular stock in this table. On the other hand Aegon N.V. (NYSE:AEG) is the least popular one with only 6 bullish hedge fund positions. Compared to these stocks Paysafe Limited (NYSE:PSFE) is more popular among hedge funds. Our overall hedge fund sentiment score for PSFE is 90. 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. 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 22.9% in 2021 through October 1st and still beat the market by 5.6 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 -36.6% since the end of the second quarter (through 10/1) 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 most of these stocks already outperformed the market since 2019.
Follow Paysafe Limited (NYSE:PSFE)
Follow Paysafe Limited (NYSE:PSFE)
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Disclosure: None. This article was originally published at Insider Monkey.
