Looking for stocks with high upside potential? Just follow the big players within the hedge fund industry. Why should you do so? Let’s take a brief look at what statistics have to say about hedge funds’ stock picking abilities to illustrate. The Standard and Poor’s 500 Index returned approximately 20% in 2019 (through September 30th). Conversely, hedge funds’ 20 preferred S&P 500 stocks generated a return of 24% during the same period, with the majority of these stock picks outperforming the broader market benchmark. Coincidence? It might happen to be so, but it is unlikely. Our research covering the last 18 years indicates that hedge funds' consensus stock picks generate superior risk-adjusted returns. That's why we believe it is wise to check hedge fund activity before you invest your time or your savings on a stock like Impinj, Inc. (NASDAQ:PI).
Impinj, Inc. (NASDAQ:PI) has experienced an increase in support from the world's most elite money managers recently. PI was in 17 hedge funds' portfolios at the end of the second quarter of 2019. There were 11 hedge funds in our database with PI holdings at the end of the previous quarter. Our calculations also showed that PI 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.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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. Even if you aren't comfortable with shorting stocks, you should at least avoid initiating long positions in our short portfolio.
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 review the key hedge fund action regarding Impinj, Inc. (NASDAQ:PI).
How have hedgies been trading Impinj, Inc. (NASDAQ:PI)?
At Q2's end, a total of 17 of the hedge funds tracked by Insider Monkey were long this stock, a change of 55% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards PI over the last 16 quarters. 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 Impinj, Inc. (NASDAQ:PI) was held by Sylebra Capital Management, which reported holding $121.1 million worth of stock at the end of March. It was followed by D E Shaw with a $22.8 million position. Other investors bullish on the company included GMT Capital, Millennium Management, and G2 Investment Partners Management.
As industrywide interest jumped, key money managers have jumped into Impinj, Inc. (NASDAQ:PI) headfirst. GMT Capital, managed by Thomas E. Claugus, assembled the most outsized position in Impinj, Inc. (NASDAQ:PI). GMT Capital had $17.5 million invested in the company at the end of the quarter. John Overdeck and David Siegel's Two Sigma Advisors also initiated a $1.3 million position during the quarter. The following funds were also among the new PI investors: Phil Frohlich's Prescott Group Capital Management, Dmitry Balyasny's Balyasny Asset Management, and Frank Slattery's Symmetry Peak Management.
Let's now take a look at hedge fund activity in other stocks similar to Impinj, Inc. (NASDAQ:PI). These stocks are Laredo Petroleum Inc (NYSE:LPI), Gladstone Commercial Corporation (NASDAQ:GOOD), Cardlytics, Inc. (NASDAQ:CDLX), and Morphic Holding, Inc. (NASDAQ:MORF). This group of stocks' market values match PI's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position LPI,14,176652,-4 GOOD,5,69741,-1 CDLX,10,102679,1 MORF,6,62838,6 Average,8.75,102978,0.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 8.75 hedge funds with bullish positions and the average amount invested in these stocks was $103 million. That figure was $188 million in PI's case. Laredo Petroleum Inc (NYSE:LPI) is the most popular stock in this table. On the other hand Gladstone Commercial Corporation (NASDAQ:GOOD) is the least popular one with only 5 bullish hedge fund positions. Compared to these stocks Impinj, Inc. (NASDAQ:PI) is more popular among hedge funds. 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. Hedge funds were also right about betting on PI as the stock returned 7.7% during Q3 and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.
Disclosure: None. This article was originally published at Insider Monkey.