Billionaire hedge fund managers such as David Abrams, Steve Cohen and Stan Druckenmiller can generate millions or even billions of dollars every year by pinning down high-potential small-cap stocks and pouring cash into these candidates. Small-cap stocks are overlooked by most investors, brokerage houses, and financial services hubs, while the nearly unlimited research abilities of the big players within the hedge fund industry can easily identify the undervalued and high-potential stocks that reside the ignored corners of equity markets. There are numerous small-cap stocks that have turned out to be great winners, which is one of the main reasons the Insider Monkey team pays close attention to the hedge fund activity in relation to these stocks.
PerkinElmer, Inc. (NYSE:PKI) was in 24 hedge funds' portfolios at the end of the second quarter of 2019. PKI shareholders have witnessed a decrease in activity from the world's largest hedge funds of late. There were 25 hedge funds in our database with PKI holdings at the end of the previous quarter. Our calculations also showed that PKI isn't among the 30 most popular stocks among hedge funds (view the video below). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
To the average investor there are many gauges market participants put to use to evaluate stocks. A pair of the most underrated gauges are hedge fund and insider trading sentiment. Our researchers have shown that, historically, those who follow the best picks of the top investment managers can outclass the market by a very impressive amount (see the details here).
Unlike some fund managers who are betting on Dow reaching 40000 in a year, 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. We're going to take a gander at the new hedge fund action encompassing PerkinElmer, Inc. (NYSE:PKI).
How have hedgies been trading PerkinElmer, Inc. (NYSE:PKI)?
At the end of the second quarter, a total of 24 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -4% from the previous quarter. By comparison, 22 hedge funds held shares or bullish call options in PKI a year ago. With hedge funds' sentiment swirling, there exists a select group of noteworthy hedge fund managers who were upping their stakes considerably (or already accumulated large positions).
Among these funds, Select Equity Group held the most valuable stake in PerkinElmer, Inc. (NYSE:PKI), which was worth $668.9 million at the end of the second quarter. On the second spot was Echo Street Capital Management which amassed $86.8 million worth of shares. Moreover, Impax Asset Management, Fisher Asset Management, and Partner Fund Management were also bullish on PerkinElmer, Inc. (NYSE:PKI), allocating a large percentage of their portfolios to this stock.
Due to the fact that PerkinElmer, Inc. (NYSE:PKI) has experienced declining sentiment from hedge fund managers, logic holds that there lies a certain "tier" of hedgies that elected to cut their positions entirely last quarter. It's worth mentioning that Michael Gelband's ExodusPoint Capital dropped the biggest stake of the "upper crust" of funds tracked by Insider Monkey, comprising close to $7.1 million in stock, and Ben Levine, Andrew Manuel and Stefan Renold's LMR Partners was right behind this move, as the fund cut about $4.5 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest dropped by 1 funds last quarter.
Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as PerkinElmer, Inc. (NYSE:PKI) but similarly valued. These stocks are Vistra Energy Corp. (NYSE:VST), Comerica Incorporated (NYSE:CMA), NiSource Inc. (NYSE:NI), and Cenovus Energy Inc (NYSE:CVE). All of these stocks' market caps resemble PKI's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position VST,39,2308414,-9 CMA,32,509157,-4 NI,22,785694,4 CVE,17,596864,-6 Average,27.5,1050032,-3.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 27.5 hedge funds with bullish positions and the average amount invested in these stocks was $1050 million. That figure was $972 million in PKI's case. Vistra Energy Corp. (NYSE:VST) is the most popular stock in this table. On the other hand Cenovus Energy Inc (NYSE:CVE) is the least popular one with only 17 bullish hedge fund positions. PerkinElmer, Inc. (NYSE:PKI) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we'd rather spend our time researching stocks that hedge funds are piling on. 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. Unfortunately PKI wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); PKI investors were disappointed as the stock returned -11.5% during the third quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far in 2019.
Disclosure: None. This article was originally published at Insider Monkey.