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Many prominent investors, including Warren Buffett, David Tepper and Stan Druckenmiller, have been cautious regarding the current bull market and missed out as the stock market reached another high in recent weeks. On the other hand, technology hedge funds weren't timid and registered double digit market beating gains. Financials, energy and industrial stocks initially suffered the most but many of these stocks delivered strong returns since November and hedge funds actually increased their positions in these stocks. In this article we will find out how hedge fund sentiment towards PagSeguro Digital Ltd. (NYSE:PAGS) changed recently.
Is PAGS stock a buy? The best stock pickers were turning bullish. The number of bullish hedge fund bets moved up by 1 lately. PagSeguro Digital Ltd. (NYSE:PAGS) was in 25 hedge funds' portfolios at the end of the fourth quarter of 2020. The all time high for this statistic is 48. Our calculations also showed that PAGS isn't among the 30 most popular stocks among hedge funds (click for Q4 rankings).
Robert Pohly of Samlyn Capital
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, auto parts business is a recession resistant business, so we are taking a closer look at this discount auto parts stock that is growing at a 196% annualized rate. We go through lists like the 15 best micro-cap stocks to buy now to identify the next stock with 10x upside potential. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. Keeping this in mind let's analyze the key hedge fund action encompassing PagSeguro Digital Ltd. (NYSE:PAGS).
Do Hedge Funds Think PAGS Is A Good Stock To Buy Now?
At fourth quarter's end, a total of 25 of the hedge funds tracked by Insider Monkey were long this stock, a change of 4% from the previous quarter. By comparison, 21 hedge funds held shares or bullish call options in PAGS a year ago. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Of the funds tracked by Insider Monkey, Sylebra Capital Management, managed by Daniel Patrick Gibson, holds the biggest position in PagSeguro Digital Ltd. (NYSE:PAGS). Sylebra Capital Management has a $648.8 million position in the stock, comprising 16.5% of its 13F portfolio. The second most bullish fund manager is Samlyn Capital, managed by Robert Pohly, which holds a $313.6 million position; 4.5% of its 13F portfolio is allocated to the company. Remaining peers that hold long positions contain Gabriel Plotkin's Melvin Capital Management, Beeneet Kothari's Tekne Capital Management and Greg Poole's Echo Street Capital Management. In terms of the portfolio weights assigned to each position Tekne Capital Management allocated the biggest weight to PagSeguro Digital Ltd. (NYSE:PAGS), around 19.67% of its 13F portfolio. Sylebra Capital Management is also relatively very bullish on the stock, setting aside 16.52 percent of its 13F equity portfolio to PAGS.
As industrywide interest jumped, key money managers have jumped into PagSeguro Digital Ltd. (NYSE:PAGS) headfirst. Melvin Capital Management, managed by Gabriel Plotkin, initiated the largest position in PagSeguro Digital Ltd. (NYSE:PAGS). Melvin Capital Management had $199.1 million invested in the company at the end of the quarter. Zach Schreiber's Point State Capital also initiated a $63.9 million position during the quarter. The following funds were also among the new PAGS investors: Gavin Baker's Atreides Management, James Crichton's Hitchwood Capital Management, and D. E. Shaw's D E Shaw.
Let's also examine hedge fund activity in other stocks similar to PagSeguro Digital Ltd. (NYSE:PAGS). We will take a look at Check Point Software Technologies Ltd. (NASDAQ:CHKP), SS&C Technologies Holdings, Inc. (NASDAQ:SSNC), Restaurant Brands International Inc (NYSE:QSR), Smith & Nephew plc (NYSE:SNN), Amcor plc (NYSE:AMCR), Ventas, Inc. (NYSE:VTR), and Xylem Inc (NYSE:XYL). This group of stocks' market caps resemble PAGS's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CHKP,26,775145,-1 SSNC,49,2623844,-5 QSR,39,2406995,6 SNN,12,78652,2 AMCR,19,247795,1 VTR,18,137388,1 XYL,21,725127,0 Average,26.3,999278,0.6 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 26.3 hedge funds with bullish positions and the average amount invested in these stocks was $999 million. That figure was $1841 million in PAGS's case. SS&C Technologies Holdings, Inc. (NASDAQ:SSNC) is the most popular stock in this table. On the other hand Smith & Nephew plc (NYSE:SNN) is the least popular one with only 12 bullish hedge fund positions. PagSeguro Digital Ltd. (NYSE:PAGS) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for PAGS is 39.2. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. 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 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks gained 12.3% in 2021 through April 19th and surpassed the market again by 0.9 percentage points. Unfortunately PAGS wasn't nearly as popular as these 30 stocks (hedge fund sentiment was quite bearish); PAGS investors were disappointed as the stock returned -21.6% since the end of December (through 4/19) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 30 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
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Disclosure: None. This article was originally published at Insider Monkey.