U.S. Markets closed

Hedge Funds Are Betting On Premier Inc (PINC)

Reymerlyn Martin

Amid an overall bull market, many stocks that smart money investors were collectively bullish on surged through the end of November. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 54% and 51% respectively. Our research shows that most of the stocks that smart money likes historically generate strong risk-adjusted returns. That's why we weren't surprised when hedge funds’ top 20 large-cap stock picks generated a return of 37.6% in 2019 (through the end of November) and outperformed the broader market benchmark by 9.9 percentage points.This is why following the smart money sentiment is a useful tool at identifying the next stock to invest in.

Is Premier Inc (NASDAQ:PINC) a bargain? Money managers are in an optimistic mood. The number of long hedge fund positions advanced by 1 lately. Our calculations also showed that PINC isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

5 Most Popular Stocks Among Hedge Funds

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' large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (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 27.8% through November 21, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

[caption id="attachment_315176" align="aligncenter" width="600"] Michael Castor of Sio Capital[/caption]

Michael Castor of Sio Capital

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. One of the most bullish analysts in America just put his money where his mouth is. He says, "I'm investing more today than I did back in early 2009." So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds' buy/sell signals. We're going to review the key hedge fund action surrounding Premier Inc (NASDAQ:PINC).

What have hedge funds been doing with Premier Inc (NASDAQ:PINC)?

Heading into the fourth quarter of 2019, a total of 17 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 6% from the previous quarter. On the other hand, there were a total of 21 hedge funds with a bullish position in PINC a year ago. So, let's check out 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 $103.3 million worth of stock at the end of September. It was followed by GLG Partners with a $12.8 million position. Other investors bullish on the company included RR Partners, D E Shaw, and Millennium Management. In terms of the portfolio weights assigned to each position RR Partners allocated the biggest weight to Premier Inc (NASDAQ:PINC), around 1.31% of its 13F portfolio. Sio Capital is also relatively very bullish on the stock, dishing out 0.64 percent of its 13F equity portfolio to PINC.

Consequently, key money managers have been driving this bullishness. Sio Capital, managed by Michael Castor, created the largest position in Premier Inc (NASDAQ:PINC). Sio Capital had $2 million invested in the company at the end of the quarter. Steve Cohen's Point72 Asset Management also made a $1 million investment in the stock during the quarter. The other funds with new positions in the stock are Ken Griffin's Citadel Investment Group, Michael Platt and William Reeves's BlueCrest Capital Mgmt., and Minhua Zhang's Weld Capital Management.

Let's now review hedge fund activity in other stocks similar to Premier Inc (NASDAQ:PINC). We will take a look at Allscripts Healthcare Solutions Inc (NASDAQ:MDRX), Callaway Golf Company (NYSE:ELY), Portola Pharmaceuticals Inc (NASDAQ:PTLA), and Hope Bancorp, Inc. (NASDAQ:HOPE). This group of stocks' market values match PINC's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position MDRX,19,184930,1 ELY,19,287822,-1 PTLA,20,293177,2 HOPE,14,68754,-1 Average,18,208671,0.25 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 18 hedge funds with bullish positions and the average amount invested in these stocks was $209 million. That figure was $167 million in PINC's case. Portola Pharmaceuticals Inc (NASDAQ:PTLA) is the most popular stock in this table. On the other hand Hope Bancorp, Inc. (NASDAQ:HOPE) is the least popular one with only 14 bullish hedge fund positions. Premier Inc (NASDAQ:PINC) 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 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. A small number of hedge funds were also right about betting on PINC as the stock returned 22.9% during the first two months of Q4 and outperformed the market by an even larger margin.

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

Related Content