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At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (Recession is Imminent: We Need A Travel Ban NOW). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards Premier Inc (NASDAQ:PINC).
Premier Inc (NASDAQ:PINC) has seen an increase in activity from the world's largest hedge funds recently. Our calculations also showed that PINC 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.
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 S&P 500 ETFs by more than 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 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 stocks that are in our short portfolio.
[caption id="attachment_30600" align="aligncenter" width="392"]
Bruce Kovner of Caxton Associates LP[/caption]
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. 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 go over the key hedge fund action surrounding Premier Inc (NASDAQ:PINC).
How are hedge funds trading Premier Inc (NASDAQ:PINC)?
Heading into the second quarter of 2020, a total of 17 of the hedge funds tracked by Insider Monkey were long this stock, a change of 21% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards PINC over the last 18 quarters. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Premier Inc (NASDAQ:PINC) was held by Renaissance Technologies, which reported holding $116.4 million worth of stock at the end of September. It was followed by Millennium Management with a $21.6 million position. Other investors bullish on the company included East Side Capital (RR Partners), Two Sigma Advisors, and Portolan Capital Management. In terms of the portfolio weights assigned to each position East Side Capital (RR Partners) allocated the biggest weight to Premier Inc (NASDAQ:PINC), around 2.58% of its 13F portfolio. Portolan Capital Management is also relatively very bullish on the stock, designating 0.82 percent of its 13F equity portfolio to PINC.
As aggregate interest increased, some big names were leading the bulls' herd. Portolan Capital Management, managed by George McCabe, established the most valuable position in Premier Inc (NASDAQ:PINC). Portolan Capital Management had $5.5 million invested in the company at the end of the quarter. Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital also made a $1.4 million investment in the stock during the quarter. The following funds were also among the new PINC investors: Hoon Kim's Quantinno Capital, Michael Gelband's ExodusPoint Capital, and Bruce Kovner's Caxton Associates LP.
Let's also examine hedge fund activity in other stocks similar to Premier Inc (NASDAQ:PINC). These stocks are Kinsale Capital Group, Inc. (NASDAQ:KNSL), Foot Locker, Inc. (NYSE:FL), South Jersey Industries Inc (NYSE:SJI), and Marriott Vacations Worldwide Corporation (NYSE:VAC). This group of stocks' market valuations match PINC's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position KNSL,7,24342,-4 FL,21,147084,-8 SJI,13,88904,-5 VAC,25,299416,0 Average,16.5,139937,-4.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 16.5 hedge funds with bullish positions and the average amount invested in these stocks was $140 million. That figure was $191 million in PINC's case. Marriott Vacations Worldwide Corporation (NYSE:VAC) is the most popular stock in this table. On the other hand Kinsale Capital Group, Inc. (NASDAQ:KNSL) is the least popular one with only 7 bullish hedge fund positions. Premier Inc (NASDAQ:PINC) is not the most popular stock in this group but hedge fund interest is still above average. 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 13.4% in 2020 through June 22nd but beat the market by 15.9 percentage points. Unfortunately PINC wasn't nearly as popular as these 10 stocks and hedge funds that were betting on PINC were disappointed as the stock returned 3% during the same time period 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.