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In this article we will take a look at whether hedge funds think Puxin Limited (NYSE:NEW) is a good investment right now. We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, unconventional data sources, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.
Puxin Limited (NYSE:NEW) shares haven't seen a lot of action during the first quarter. Overall, hedge fund sentiment was unchanged. The stock was in 8 hedge funds' portfolios at the end of the first quarter of 2020. The level and the change in hedge fund popularity aren't the only variables you need to analyze to decipher hedge funds' perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That's why at the end of this article we will examine companies such as Controladora Vuela Compania de Aviacion, S.A.B. de C.V. (NYSE:VLRS), Boot Barn Holdings Inc (NYSE:BOOT), and IES Holdings, Inc. (NASDAQ:IESC) to gather more data points. Our calculations also showed that NEW 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.
Today there are a multitude of indicators market participants can use to analyze their holdings. Two of the most useful indicators are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the top hedge fund managers can outclass the broader indices by a superb amount (see the details here).
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Lei Zhang of Hillhouse Capital Management[/caption]
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, We take a look at lists like the 10 most profitable companies in the world to identify the compounders that are likely to deliver double digit returns. We interview hedge fund managers and ask them about their best ideas. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. For example we are checking out stocks recommended/scorned by legendary Bill Miller. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind we're going to analyze the fresh hedge fund action encompassing Puxin Limited (NYSE:NEW).
What does smart money think about Puxin Limited (NYSE:NEW)?
Heading into the second quarter of 2020, a total of 8 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from the fourth quarter of 2019. By comparison, 2 hedge funds held shares or bullish call options in NEW a year ago. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Serenity Capital was the largest shareholder of Puxin Limited (NYSE:NEW), with a stake worth $2.9 million reported as of the end of September. Trailing Serenity Capital was Balyasny Asset Management, which amassed a stake valued at $0.9 million. Renaissance Technologies, Hillhouse Capital Management, and Millennium Management were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Serenity Capital allocated the biggest weight to Puxin Limited (NYSE:NEW), around 0.62% of its 13F portfolio. Balyasny Asset Management is also relatively very bullish on the stock, earmarking 0.01 percent of its 13F equity portfolio to NEW.
Seeing as Puxin Limited (NYSE:NEW) has experienced a decline in interest from hedge fund managers, it's safe to say that there exists a select few fund managers that elected to cut their entire stakes last quarter. Interestingly, Ken Griffin's Citadel Investment Group said goodbye to the largest position of all the hedgies monitored by Insider Monkey, valued at an estimated $0.4 million in stock. Matthew Tewksbury's fund, Stevens Capital Management, also said goodbye to its stock, about $0.1 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).
Let's check out hedge fund activity in other stocks - not necessarily in the same industry as Puxin Limited (NYSE:NEW) but similarly valued. These stocks are Controladora Vuela Compania de Aviacion, S.A.B. de C.V. (NYSE:VLRS), Boot Barn Holdings Inc (NYSE:BOOT), IES Holdings, Inc. (NASDAQ:IESC), and Impinj, Inc. (NASDAQ:PI). This group of stocks' market valuations are similar to NEW's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position VLRS,9,33933,-2 BOOT,20,31760,-8 IESC,10,237335,-1 PI,18,137212,-2 Average,14.25,110060,-3.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 14.25 hedge funds with bullish positions and the average amount invested in these stocks was $110 million. That figure was $6 million in NEW's case. Boot Barn Holdings Inc (NYSE:BOOT) is the most popular stock in this table. On the other hand Controladora Vuela Compania de Aviacion, S.A.B. de C.V. (NYSE:VLRS) is the least popular one with only 9 bullish hedge fund positions. Compared to these stocks Puxin Limited (NYSE:NEW) is even less popular than VLRS. Hedge funds clearly dropped the ball on NEW as the stock delivered strong returns, though hedge funds' consensus picks still generated respectable returns. 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 12.2% in 2020 through June 17th and still beat the market by 14.8 percentage points. A small number of hedge funds were also right about betting on NEW as the stock returned 42.3% so far in the second quarter and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.