Before we spend countless hours researching a company, we like to analyze what insiders, hedge funds and billionaire investors think of the stock first. This is a necessary first step in our investment process because our research has shown that the elite investors' consensus returns have been exceptional. In the following paragraphs, we find out what the billionaire investors and hedge funds think of Pilgrim's Pride Corporation (NASDAQ:PPC).
Is Pilgrim's Pride Corporation (NASDAQ:PPC) the right pick for your portfolio? The best stock pickers are getting less optimistic. The number of long hedge fund bets shrunk by 6 lately. Our calculations also showed that PPC 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.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings 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'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 36% through May 18th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
[caption id="attachment_745225" align="aligncenter" width="400"] Noam Gottesman of GLG Partners[/caption]
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. 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. With all of this in mind let's take a look at the recent hedge fund action surrounding Pilgrim's Pride Corporation (NASDAQ:PPC).
What does smart money think about Pilgrim's Pride Corporation (NASDAQ:PPC)?
At the end of the first quarter, a total of 18 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -25% from the previous quarter. The graph below displays the number of hedge funds with bullish position in PPC over the last 18 quarters. With hedgies' positions undergoing their usual ebb and flow, there exists an "upper tier" of notable hedge fund managers who were boosting their holdings considerably (or already accumulated large positions).
Among these funds, AQR Capital Management held the most valuable stake in Pilgrim's Pride Corporation (NASDAQ:PPC), which was worth $60.9 million at the end of the third quarter. On the second spot was Renaissance Technologies which amassed $23 million worth of shares. Citadel Investment Group, Millennium Management, and GLG Partners 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 Centenus Global Management allocated the biggest weight to Pilgrim's Pride Corporation (NASDAQ:PPC), around 1.07% of its 13F portfolio. Weld Capital Management is also relatively very bullish on the stock, setting aside 0.15 percent of its 13F equity portfolio to PPC.
Judging by the fact that Pilgrim's Pride Corporation (NASDAQ:PPC) has experienced a decline in interest from the aggregate hedge fund industry, it's safe to say that there is a sect of fund managers who were dropping their positions entirely in the first quarter. At the top of the heap, Dmitry Balyasny's Balyasny Asset Management cut the largest stake of the 750 funds monitored by Insider Monkey, totaling close to $14.9 million in stock. Zach Schreiber's fund, Point State Capital, also sold off its stock, about $7.1 million worth. These transactions are interesting, as total hedge fund interest fell by 6 funds in the first quarter.
Let's also examine hedge fund activity in other stocks similar to Pilgrim's Pride Corporation (NASDAQ:PPC). These stocks are Woori Financial Group Inc. (NYSE:WF), Quanta Services Inc (NYSE:PWR), Etsy Inc (NASDAQ:ETSY), and XPO Logistics Inc (NYSE:XPO). All of these stocks' market caps resemble PPC's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position WF,3,2382,0 PWR,28,1509183,-16 ETSY,38,712742,-8 XPO,36,1719666,4 Average,26.25,985993,-5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 26.25 hedge funds with bullish positions and the average amount invested in these stocks was $986 million. That figure was $122 million in PPC's case. Etsy Inc (NASDAQ:ETSY) is the most popular stock in this table. On the other hand Woori Financial Group Inc. (NYSE:WF) is the least popular one with only 3 bullish hedge fund positions. Pilgrim's Pride Corporation (NASDAQ:PPC) 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 13.4% in 2020 through June 22nd and surpassed the market by 15.9 percentage points. Unfortunately PPC wasn't nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); PPC investors were disappointed as the stock returned -1.3% 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.