We are still in an overall bull market and many stocks that smart money investors were piling into surged through October 17th. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 45% and 39% respectively. Hedge funds' top 3 stock picks returned 34.4% this year and beat the S&P 500 ETFs by 13 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. That's why we believe it isn't a waste of time to check out hedge fund sentiment before you invest in a stock like PAR Technology Corporation (NYSE:PAR).
PAR Technology Corporation (NYSE:PAR) was in 5 hedge funds' portfolios at the end of June. PAR has experienced a decrease in support from the world's most elite money managers recently. There were 6 hedge funds in our database with PAR positions at the end of the previous quarter. Our calculations also showed that PAR 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.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey's flagship best performing hedge funds strategy returned 25.8% year to date (through May 30th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 40 percentage points since its inception (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Unlike former hedge manager, Dr. Steve Sjuggerud, 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. We're going to take a look at the key hedge fund action encompassing PAR Technology Corporation (NYSE:PAR).
How are hedge funds trading PAR Technology Corporation (NYSE:PAR)?
At Q2's end, a total of 5 of the hedge funds tracked by Insider Monkey were long this stock, a change of -17% from the first quarter of 2019. By comparison, 3 hedge funds held shares or bullish call options in PAR a year ago. With the smart money's positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were increasing their stakes substantially (or already accumulated large positions).
More specifically, Nantahala Capital Management was the largest shareholder of PAR Technology Corporation (NYSE:PAR), with a stake worth $16.9 million reported as of the end of March. Trailing Nantahala Capital Management was Royce & Associates, which amassed a stake valued at $8.4 million. 3G Capital, Deep Field Asset Management, and PEAK6 Capital Management were also very fond of the stock, giving the stock large weights in their portfolios.
Since PAR Technology Corporation (NYSE:PAR) has faced a decline in interest from the entirety of the hedge funds we track, it's safe to say that there is a sect of hedge funds that elected to cut their positions entirely last quarter. Intriguingly, Manoneet Singh's Kavi Asset Management dumped the largest investment of all the hedgies watched by Insider Monkey, valued at about $4.9 million in stock. Peter Rathjens, Bruce Clarke and John Campbell's fund, Arrowstreet Capital, also dumped its stock, about $1.1 million worth. These moves are important to note, as total hedge fund interest dropped by 1 funds last quarter.
Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as PAR Technology Corporation (NYSE:PAR) but similarly valued. We will take a look at Clarus Corporation (NASDAQ:CLAR), Penn Virginia Corporation (NASDAQ:PVAC), Equity Bancshares, Inc. (NASDAQ:EQBK), and Establishment Labs Holdings Inc. (NASDAQ:ESTA). This group of stocks' market values resemble PAR's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CLAR,14,59330,1 PVAC,17,191377,0 EQBK,5,41098,-2 ESTA,7,58648,-2 Average,10.75,87613,-0.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 10.75 hedge funds with bullish positions and the average amount invested in these stocks was $88 million. That figure was $32 million in PAR's case. Penn Virginia Corporation (NASDAQ:PVAC) is the most popular stock in this table. On the other hand Equity Bancshares, Inc. (NASDAQ:EQBK) is the least popular one with only 5 bullish hedge fund positions. Compared to these stocks PAR Technology Corporation (NYSE:PAR) is even less popular than EQBK. Hedge funds dodged a bullet by taking a bearish stance towards PAR. Our calculations showed that the top 20 most popular hedge fund stocks returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately PAR wasn't nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); PAR investors were disappointed as the stock returned -15.7% during the third quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far in 2019.
Disclosure: None. This article was originally published at Insider Monkey.