U.S. Markets open in 2 hrs 3 mins

Hedge Funds Have Never Been This Bullish On Performance Food Group Company (PFGC)

Nina Todic

Hedge funds are known to underperform the bull markets but that's not because they are bad at investing. Truth be told, most hedge fund managers and other smaller players within this industry are very smart and skilled investors. Of course, they may also make wrong bets in some instances, but no one knows what the future holds and how market participants will react to the bountiful news that floods in each day. Hedge funds underperform because they are hedged. The Standard and Poor’s 500 Index returned approximately 12.1% in the first 5 months of this year through May 30th (including dividend payments). Conversely, hedge funds’ top 20 large-cap stock picks generated a return of 18.7% during the same 5-month period. An average long/short hedge fund returned only a fraction of this due to the hedges they implement and the large fees they charge. Our research covering the last 18 years indicates that investors can outperform the market by imitating hedge funds' stock picks rather than directly investing in hedge funds. 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 Performance Food Group Company (NYSE:PFGC).

Performance Food Group Company (NYSE:PFGC) was in 25 hedge funds' portfolios at the end of March. PFGC investors should pay attention to an increase in activity from the world's largest hedge funds of late. There were 18 hedge funds in our database with PFGC positions at the end of the previous quarter. Our calculations also showed that pfgc isn't among the 30 most popular stocks among hedge funds.

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.

Dmitry Balyasny

Let's take a glance at the new hedge fund action encompassing Performance Food Group Company (NYSE:PFGC).

How have hedgies been trading Performance Food Group Company (NYSE:PFGC)?

At the end of the first quarter, a total of 25 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 39% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards PFGC over the last 15 quarters. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

No of Hedge Funds with PFGC Positions

Among these funds, GLG Partners held the most valuable stake in Performance Food Group Company (NYSE:PFGC), which was worth $42.7 million at the end of the first quarter. On the second spot was Interval Partners which amassed $29.8 million worth of shares. Moreover, Hoplite Capital Management, Two Sigma Advisors, and Balyasny Asset Management were also bullish on Performance Food Group Company (NYSE:PFGC), allocating a large percentage of their portfolios to this stock.

Consequently, some big names were breaking ground themselves. Hoplite Capital Management, managed by John Lykouretzos, established the biggest position in Performance Food Group Company (NYSE:PFGC). Hoplite Capital Management had $22.3 million invested in the company at the end of the quarter. Anthony Joseph Vaccarino's North Fourth Asset Management also initiated a $11 million position during the quarter. The other funds with new positions in the stock are Leon Shaulov's Maplelane Capital, Peter Algert and Kevin Coldiron's Algert Coldiron Investors, and Minhua Zhang's Weld Capital Management.

Let's now review hedge fund activity in other stocks - not necessarily in the same industry as Performance Food Group Company (NYSE:PFGC) but similarly valued. These stocks are Gates Industrial Corporation plc (NYSE:GTES), Six Flags Entertainment Corp (NYSE:SIX), CVR Energy, Inc. (NYSE:CVI), and Lazard Ltd (NYSE:LAZ). This group of stocks' market valuations are similar to PFGC's market valuation.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position GTES,9,9016,1 SIX,30,650171,7 CVI,22,3050956,0 LAZ,16,580657,0 Average,19.25,1072700,2 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 19.25 hedge funds with bullish positions and the average amount invested in these stocks was $1073 million. That figure was $192 million in PFGC's case. Six Flags Entertainment Corp (NYSE:SIX) is the most popular stock in this table. On the other hand Gates Industrial Corporation plc (NYSE:GTES) is the least popular one with only 9 bullish hedge fund positions. Performance Food Group Company (NYSE:PFGC) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 20 most popular stocks among hedge funds returned 1.9% in Q2 through May 30th and outperformed the S&P 500 ETF (SPY) by more than 3 percentage points. Hedge funds were also right about betting on PFGC, though not to the same extent, as the stock returned -0.2% during the same time frame and outperformed the market as well.

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

Related Content