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Hedge funds and large money managers usually invest with a focus on the long-term horizon and, therefore, short-lived dips or bumps on the charts usually don't make them change their opinion towards a company. This time it may be different. The coronavirus pandemic destroyed the high correlations among major industries and asset classes. We are now in a stock pickers market where fundamentals of a stock have more effect on the price than the overall direction of the market. As a result we observe sudden and large changes in hedge fund positions depending on the news flow. Let’s take a look at the hedge fund sentiment towards Piper Sandler Companies (NYSE:PIPR) to find out whether there were any major changes in hedge funds' views.
Is PIPR a good stock to buy now? Hedge funds were taking a bullish view. The number of long hedge fund positions inched up by 1 in recent months. Piper Sandler Companies (NYSE:PIPR) was in 14 hedge funds' portfolios at the end of the third quarter of 2020. The all time high for this statistic is 17. Our calculations also showed that PIPR isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks). There were 13 hedge funds in our database with PIPR positions at the end of the second quarter.
Video: Watch our video about the top 5 most popular hedge fund stocks.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 more than 66 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. Even if you aren't comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
Ryan Tolkin, CIO of Schonfeld Strategic Advisors
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks to pick the best large-cap stocks to buy. 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. Now let's review the key hedge fund action regarding Piper Sandler Companies (NYSE:PIPR).
Do Hedge Funds Think PIPR Is A Good Stock To Buy Now?
At third quarter's end, a total of 14 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 8% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards PIPR over the last 21 quarters. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Renaissance Technologies was the largest shareholder of Piper Sandler Companies (NYSE:PIPR), with a stake worth $22.9 million reported as of the end of September. Trailing Renaissance Technologies was Fisher Asset Management, which amassed a stake valued at $7.3 million. Arrowstreet Capital, Millennium Management, and Two Sigma Advisors 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 Piper Sandler Companies (NYSE:PIPR), around 0.07% of its 13F portfolio. Tudor Investment Corp is also relatively very bullish on the stock, earmarking 0.02 percent of its 13F equity portfolio to PIPR.
Now, specific money managers were breaking ground themselves. PEAK6 Capital Management, managed by Matthew Hulsizer, established the largest position in Piper Sandler Companies (NYSE:PIPR). PEAK6 Capital Management had $0.5 million invested in the company at the end of the quarter. Donald Sussman's Paloma Partners also initiated a $0.3 million position during the quarter. The only other fund with a new position in the stock is Ryan Tolkin (CIO)'s Schonfeld Strategic Advisors.
Let's also examine hedge fund activity in other stocks similar to Piper Sandler Companies (NYSE:PIPR). These stocks are Service Properties Trust (NASDAQ:SVC), Zentalis Pharmaceuticals, Inc. (NASDAQ:ZNTL), Whiting Petroleum Corporation (NYSE:WLL), Magnolia Oil & Gas Corporation (NYSE:MGY), Core-Mark Holding Company, Inc. (NASDAQ:CORE), Broadmark Realty Capital Inc. (NYSE:BRMK), and Mesa Laboratories, Inc. (NASDAQ:MLAB). This group of stocks' market values are similar to PIPR's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position SVC,15,79288,-6 ZNTL,14,599791,3 WLL,18,131921,12 MGY,19,87213,-1 CORE,20,45034,5 BRMK,11,85821,3 MLAB,8,104292,-6 Average,15,161909,1.4 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 15 hedge funds with bullish positions and the average amount invested in these stocks was $162 million. That figure was $45 million in PIPR's case. Core-Mark Holding Company, Inc. (NASDAQ:CORE) is the most popular stock in this table. On the other hand Mesa Laboratories, Inc. (NASDAQ:MLAB) is the least popular one with only 8 bullish hedge fund positions. Piper Sandler Companies (NYSE:PIPR) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for PIPR is 55.7. 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. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 32.9% in 2020 through December 8th and still beat the market by 16.2 percentage points. A small number of hedge funds were also right about betting on PIPR as the stock returned 34.3% since the end of the third quarter (through 12/8) and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.