In this article we will take a look at whether hedge funds think Performance Food Group Company (NYSE:PFGC) 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.
Is Performance Food Group Company (NYSE:PFGC) a good stock to buy now? Money managers are taking a bearish view. The number of long hedge fund positions decreased by 2 in recent months. Our calculations also showed that PFGC 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). PFGC was in 29 hedge funds' portfolios at the end of March. There were 31 hedge funds in our database with PFGC holdings at the end of the previous quarter. Video: Watch our video about the top 5 most popular hedge fund stocks.
Hedge funds' reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn't keep up with the unhedged returns of the market indices. 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 S&P 500 ETFs by 58 percentage points since March 2017 (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.
[caption id="attachment_339739" align="aligncenter" width="400"] Ricky Sandler of Eminence Capital[/caption]
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out trades like this one as well as this tiny lithium play. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind we're going to take a look at the key hedge fund action surrounding Performance Food Group Company (NYSE:PFGC).
Hedge fund activity in Performance Food Group Company (NYSE:PFGC)
At the end of the first quarter, a total of 29 of the hedge funds tracked by Insider Monkey were long this stock, a change of -6% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards PFGC over the last 18 quarters. With hedgies' capital changing hands, there exists an "upper tier" of noteworthy hedge fund managers who were adding to their stakes meaningfully (or already accumulated large positions).
More specifically, Eminence Capital was the largest shareholder of Performance Food Group Company (NYSE:PFGC), with a stake worth $36.3 million reported as of the end of September. Trailing Eminence Capital was Interval Partners, which amassed a stake valued at $31.3 million. GLG Partners, Millennium Management, and Maplelane Capital 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 Interval Partners allocated the biggest weight to Performance Food Group Company (NYSE:PFGC), around 2.41% of its 13F portfolio. Marathon Partners is also relatively very bullish on the stock, setting aside 1.36 percent of its 13F equity portfolio to PFGC.
Seeing as Performance Food Group Company (NYSE:PFGC) has witnessed declining sentiment from the aggregate hedge fund industry, logic holds that there were a few hedge funds that decided to sell off their full holdings in the first quarter. It's worth mentioning that Andrew Immerman and Jeremy Schiffman's Palestra Capital Management sold off the biggest investment of all the hedgies monitored by Insider Monkey, totaling about $104.2 million in stock. Clint Carlson's fund, Carlson Capital, also dropped its stock, about $19.1 million worth. These bearish behaviors are important to note, as total hedge fund interest was cut by 2 funds in the first quarter.
Let's also examine hedge fund activity in other stocks similar to Performance Food Group Company (NYSE:PFGC). These stocks are Harley-Davidson, Inc. (NYSE:HOG), Carter's, Inc. (NYSE:CRI), Descartes Systems Group (NASDAQ:DSGX), and NeoGenomics, Inc. (NASDAQ:NEO). This group of stocks' market caps are similar to PFGC's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position HOG,17,88189,-2 CRI,23,149581,2 DSGX,10,103626,-2 NEO,11,51026,-1 Average,15.25,98106,-0.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 15.25 hedge funds with bullish positions and the average amount invested in these stocks was $98 million. That figure was $190 million in PFGC's case. Carter's, Inc. (NYSE:CRI) is the most popular stock in this table. On the other hand Descartes Systems Group (NASDAQ:DSGX) is the least popular one with only 10 bullish hedge fund positions. Compared to these stocks Performance Food Group Company (NYSE:PFGC) is more popular among hedge funds. 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 8.3% in 2020 through the end of May and still beat the market by 13.2 percentage points. Unfortunately PFGC wasn't nearly as popular as these 10 stocks and hedge funds that were betting on PFGC were disappointed as the stock returned 7.8% during the second quarter (through the end of May) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
Disclosure: None. This article was originally published at Insider Monkey.