Is Perma-Pipe International Holdings, Inc. (NASDAQ:PPIH) a good bet right now? We like to analyze hedge fund sentiment before conducting days of in-depth research. We do so because hedge funds and other elite investors have numerous Ivy League graduates, expert network advisers, and supply chain tipsters working or consulting for them. There is not a shortage of news stories covering failed hedge fund investments and it is a fact that hedge funds' picks don't beat the market 100% of the time, but their consensus picks have historically done very well and have outperformed the market after adjusting for risk.
Perma-Pipe International Holdings, Inc. (NASDAQ:PPIH) shares haven't seen a lot of action during the third quarter. Overall, hedge fund sentiment was unchanged. The stock was in 2 hedge funds' portfolios at the end of the third quarter of 2019. At the end of this article we will also compare PPIH to other stocks including Erytech Pharma S.A. (NASDAQ:ERYP), Pacific Coast Oil Trust (NYSE:ROYT), and Vista Gold Corp. (NYSEAMEX:VGZ) to get a better sense of its popularity. 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 91% since May 2014 and outperformed the Russell 2000 ETFs by nearly 40 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Let's take a look at the key hedge fund action surrounding Perma-Pipe International Holdings, Inc. (NASDAQ:PPIH).
How have hedgies been trading Perma-Pipe International Holdings, Inc. (NASDAQ:PPIH)?
Heading into the fourth quarter of 2019, a total of 2 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from one quarter earlier. On the other hand, there were a total of 3 hedge funds with a bullish position in PPIH 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.
More specifically, Cannell Capital was the largest shareholder of Perma-Pipe International Holdings, Inc. (NASDAQ:PPIH), with a stake worth $5.8 million reported as of the end of September. Trailing Cannell Capital was Renaissance Technologies, which amassed a stake valued at $2.2 million.
Earlier we told you that the aggregate hedge fund interest in the stock was unchanged and we view this as a negative development. Even though there weren't any hedge funds dumping their holdings during the third quarter, there weren't any hedge funds initiating brand new positions. This indicates that hedge funds, at the very best, perceive this stock as dead money and they haven't identified any viable catalysts that can attract investor attention.
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Perma-Pipe International Holdings, Inc. (NASDAQ:PPIH) but similarly valued. These stocks are Erytech Pharma S.A. (NASDAQ:ERYP), Pacific Coast Oil Trust (NYSE:ROYT), Vista Gold Corp. (NYSE:VGZ), and Richardson Electronics, Ltd. (NASDAQ:RELL). This group of stocks' market values are closest to PPIH's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position ERYP,2,2853,0 ROYT,2,1000,0 VGZ,2,14230,0 RELL,3,12199,0 Average,2.25,7571,0 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 2.25 hedge funds with bullish positions and the average amount invested in these stocks was $8 million. That figure was $8 million in PPIH's case. Richardson Electronics, Ltd. (NASDAQ:RELL) is the most popular stock in this table. On the other hand Erytech Pharma S.A. (NASDAQ:ERYP) is the least popular one with only 2 bullish hedge fund positions. Compared to these stocks Perma-Pipe International Holdings, Inc. (NASDAQ:PPIH) is even less popular than ERYP. Hedge funds dodged a bullet by taking a bearish stance towards PPIH. Our calculations showed that the top 20 most popular hedge fund stocks returned 34.7% in 2019 through November 22nd and outperformed the S&P 500 ETF (SPY) by 8.5 percentage points. Unfortunately PPIH wasn't nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); PPIH investors were disappointed as the stock returned -8.1% during the fourth quarter (through 11/22) 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 70 percent of these stocks already outperformed the market so far in Q4.
Disclosure: None. This article was originally published at Insider Monkey.
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