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How Hedge Funds Traded Profire Energy, Inc. (PFIE) During The Crash

Abigail Fisher

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. Insider Monkey finished processing 821 13F filings submitted by hedge funds and prominent investors. These filings show these funds' portfolio positions as of March 31st, 2020. What do these smart investors think about Profire Energy, Inc. (NASDAQ:PFIE)?

Profire Energy, Inc. (NASDAQ:PFIE) investors should pay attention to a decrease in enthusiasm from smart money recently. Our calculations also showed that PFIE 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). Video: 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 monthly stock picks returned 72% since March 2017 and outperformed the S&P 500 ETFs by more than 44 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.

[caption id="attachment_193003" align="aligncenter" width="399"] Chuck Royce of Royce & Associates[/caption]

Chuck Royce

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, legendary investor Bill Miller told investors to sell 7 extremely popular recession stocks last month. So, we went through his list and recommended another stock with 100% upside potential instead. We interview hedge fund managers and ask them about their best ideas. You can watch our latest hedge fund manager interview here and find out the name of the large-cap healthcare stock that Sio Capital's Michael Castor expects to double. 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 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 analyze the new hedge fund action encompassing Profire Energy, Inc. (NASDAQ:PFIE).

What does smart money think about Profire Energy, Inc. (NASDAQ:PFIE)?

Heading into the second quarter of 2020, a total of 3 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -50% from one quarter earlier. By comparison, 9 hedge funds held shares or bullish call options in PFIE a year ago. With hedge funds' sentiment swirling, there exists a few notable hedge fund managers who were boosting their stakes substantially (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, Chuck Royce's Royce & Associates has the largest position in Profire Energy, Inc. (NASDAQ:PFIE), worth close to $1.5 million, comprising less than 0.1%% of its total 13F portfolio. Sitting at the No. 2 spot is Renaissance Technologies, with a $1 million position; less than 0.1%% of its 13F portfolio is allocated to the stock. In terms of the portfolio weights assigned to each position Ancora Advisors allocated the biggest weight to Profire Energy, Inc. (NASDAQ:PFIE), around 0.03% of its 13F portfolio. Royce & Associates is also relatively very bullish on the stock, designating 0.02 percent of its 13F equity portfolio to PFIE.

Due to the fact that Profire Energy, Inc. (NASDAQ:PFIE) has faced a decline in interest from the aggregate hedge fund industry, it's safe to say that there were a few money managers that slashed their positions entirely by the end of the third quarter. Intriguingly, Nick Thakore's Diametric Capital dumped the largest position of all the hedgies monitored by Insider Monkey, worth an estimated $0.2 million in stock. Cliff Asness's fund, AQR Capital Management, also dumped its stock, about $0 million worth. These moves are intriguing to say the least, as total hedge fund interest fell by 3 funds by the end of the third quarter.

Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as Profire Energy, Inc. (NASDAQ:PFIE) but similarly valued. These stocks are Neos Therapeutics Inc (NASDAQ:NEOS), Entera Bio Ltd. (NASDAQ:ENTX), Natural Health Trends Corp. (NASDAQ:NHTC), and Ark Restaurants Corp. (NASDAQ:ARKR). This group of stocks' market values are closest to PFIE's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position NEOS,10,9798,3 ENTX,2,3643,0 NHTC,4,3613,-1 ARKR,1,959,0 Average,4.25,4503,0.5 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 4.25 hedge funds with bullish positions and the average amount invested in these stocks was $5 million. That figure was $3 million in PFIE's case. Neos Therapeutics Inc (NASDAQ:NEOS) is the most popular stock in this table. On the other hand Ark Restaurants Corp. (NASDAQ:ARKR) is the least popular one with only 1 bullish hedge fund positions. Profire Energy, Inc. (NASDAQ:PFIE) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we'd rather spend our time researching stocks that hedge funds are piling on. 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 7.9% in 2020 through May 22nd and surpassed the market by 15.6 percentage points. Unfortunately PFIE wasn't nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); PFIE investors were disappointed as the stock returned -2.3% during the second 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 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.

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