Is Perrigo Company plc (NYSE:PRGO) a good stock to buy right now? We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also have numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.
Perrigo Company plc (NYSE:PRGO) was in 21 hedge funds' portfolios at the end of the second quarter of 2019. PRGO investors should be aware of an increase in enthusiasm from smart money recently. There were 18 hedge funds in our database with PRGO holdings at the end of the previous quarter. Our calculations also showed that PRGO isn't among the 30 most popular stocks among hedge funds (see the video below). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Hedge funds' reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn't keep up with the unhedged returns of the market indices. 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 market by 40 percentage points since May 2014 through May 30, 2019 (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.
Unlike this former hedge fund manager who is convinced Dow will soar past 40000, 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. Let's take a glance at the recent hedge fund action surrounding Perrigo Company plc (NYSE:PRGO).
How have hedgies been trading Perrigo Company plc (NYSE:PRGO)?
Heading into the third quarter of 2019, a total of 21 of the hedge funds tracked by Insider Monkey were long this stock, a change of 17% from the first quarter of 2019. On the other hand, there were a total of 25 hedge funds with a bullish position in PRGO a year ago. 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 Perrigo Company plc (NYSE:PRGO) was held by Starboard Value LP, which reported holding $478.2 million worth of stock at the end of March. It was followed by Camber Capital Management with a $95.2 million position. Other investors bullish on the company included Two Sigma Advisors, Diamond Hill Capital, and Balyasny Asset Management.
As aggregate interest increased, key hedge funds have jumped into Perrigo Company plc (NYSE:PRGO) headfirst. Diamond Hill Capital, managed by Ric Dillon, created the biggest position in Perrigo Company plc (NYSE:PRGO). Diamond Hill Capital had $32.4 million invested in the company at the end of the quarter. Dmitry Balyasny's Balyasny Asset Management also initiated a $15.3 million position during the quarter. The other funds with brand new PRGO positions are Paul Marshall and Ian Wace's Marshall Wace LLP, Joel Greenblatt's Gotham Asset Management, and Lee Ainslie's Maverick Capital.
Let's also examine hedge fund activity in other stocks similar to Perrigo Company plc (NYSE:PRGO). These stocks are CyrusOne Inc (NASDAQ:CONE), Signature Bank (NASDAQ:SBNY), Steel Dynamics, Inc. (NASDAQ:STLD), and East West Bancorp, Inc. (NASDAQ:EWBC). This group of stocks' market valuations match PRGO's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CONE,18,173157,1 SBNY,29,513611,-7 STLD,31,591407,4 EWBC,28,378757,-1 Average,26.5,414233,-0.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 26.5 hedge funds with bullish positions and the average amount invested in these stocks was $414 million. That figure was $721 million in PRGO's case. Steel Dynamics, Inc. (NASDAQ:STLD) is the most popular stock in this table. On the other hand CyrusOne Inc (NASDAQ:CONE) is the least popular one with only 18 bullish hedge fund positions. Perrigo Company plc (NYSE:PRGO) is not the least popular stock in this group but hedge fund interest is still below average. 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. A small number of hedge funds were also right about betting on PRGO as the stock returned 17.9% during the same time frame and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.