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Should You Avoid Primerica, Inc. (PRI)?

Asma UL Husna

In this article you are going to find out whether hedge funds think Primerica, Inc. (NYSE:PRI) is a good investment right now. We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It's not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.

Is Primerica, Inc. (NYSE:PRI) a great investment now? The smart money is taking a bearish view. The number of long hedge fund positions were cut by 5 recently. Our calculations also showed that PRI isn't among the 30 most popular stocks among hedge funds (click for Q1 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.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 58 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 36% through May 18th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

[caption id="attachment_192997" align="aligncenter" width="399"] Glenn Greenberg of Brave Warrior Capital[/caption]

Glenn Greenberg

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out trades like this one. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind let's take a look at the key hedge fund action regarding Primerica, Inc. (NYSE:PRI).

Hedge fund activity in Primerica, Inc. (NYSE:PRI)

Heading into the second quarter of 2020, a total of 23 of the hedge funds tracked by Insider Monkey were long this stock, a change of -18% from the previous quarter. The graph below displays the number of hedge funds with bullish position in PRI over the last 18 quarters. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

According to Insider Monkey's hedge fund database, Glenn Greenberg's Brave Warrior Capital has the biggest position in Primerica, Inc. (NYSE:PRI), worth close to $129.9 million, corresponding to 7.5% of its total 13F portfolio. The second most bullish fund manager is William von Mueffling of Cantillon Capital Management, with a $87.4 million position; the fund has 1% of its 13F portfolio invested in the stock. Remaining members of the smart money that hold long positions consist of Noam Gottesman's GLG Partners, Paul Marshall and Ian Wace's Marshall Wace LLP and Renaissance Technologies. In terms of the portfolio weights assigned to each position Brave Warrior Capital allocated the biggest weight to Primerica, Inc. (NYSE:PRI), around 7.48% of its 13F portfolio. Prospector Partners is also relatively very bullish on the stock, designating 1.45 percent of its 13F equity portfolio to PRI.

Due to the fact that Primerica, Inc. (NYSE:PRI) has witnessed declining sentiment from hedge fund managers, it's safe to say that there lies a certain "tier" of hedge funds that decided to sell off their entire stakes by the end of the first quarter. It's worth mentioning that Donald Sussman's Paloma Partners dumped the largest position of the "upper crust" of funds monitored by Insider Monkey, comprising about $2.9 million in stock, and Michael Kharitonov and Jon David McAuliffe's Voleon Capital was right behind this move, as the fund dropped about $1.2 million worth. These transactions are interesting, as total hedge fund interest fell by 5 funds by the end of the first quarter.

Let's now take a look at hedge fund activity in other stocks similar to Primerica, Inc. (NYSE:PRI). These stocks are Everbridge, Inc. (NASDAQ:EVBG), Helen of Troy Limited (NASDAQ:HELE), Healthequity Inc (NASDAQ:HQY), and BridgeBio Pharma, Inc. (NASDAQ:BBIO). This group of stocks' market values are similar to PRI's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position EVBG,31,796566,-6 HELE,16,135725,-1 HQY,19,96054,-4 BBIO,12,1212843,1 Average,19.5,560297,-2.5 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 19.5 hedge funds with bullish positions and the average amount invested in these stocks was $560 million. That figure was $304 million in PRI's case. Everbridge, Inc. (NASDAQ:EVBG) is the most popular stock in this table. On the other hand BridgeBio Pharma, Inc. (NASDAQ:BBIO) is the least popular one with only 12 bullish hedge fund positions. Primerica, Inc. (NYSE:PRI) is not the most popular stock in this group but hedge fund interest is still above average. 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 13.9% in 2020 through June 10th but still beat the market by 14.2 percentage points. Hedge funds were also right about betting on PRI as the stock returned 37.7% in Q2 (through June 10th) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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

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