The Insider Monkey team has completed processing the quarterly 13F filings for the September quarter submitted by the hedge funds and other money managers included in our extensive database. Most hedge fund investors experienced strong gains on the back of a strong market performance, which certainly propelled them to adjust their equity holdings so as to maintain the desired risk profile. As a result, the relevancy of these public filings and their content is indisputable, as they may reveal numerous high-potential stocks. The following article will discuss the smart money sentiment towards The Pennant Group, Inc. (NASDAQ:PNTG).
Is PNTG a good stock to buy now? Money managers were taking an optimistic view. The number of long hedge fund positions moved up by 5 in recent months. The Pennant Group, Inc. (NASDAQ:PNTG) was in 15 hedge funds' portfolios at the end of the third quarter of 2020. The all time high for this statistic is 10. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that PNTG 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 10 hedge funds in our database with PNTG positions at the end of the second 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 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.
Sander Gerber of Hudson Bay Capital
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 we're going to go over the latest hedge fund action encompassing The Pennant Group, Inc. (NASDAQ:PNTG).
Do Hedge Funds Think PNTG Is A Good Stock To Buy Now?
At the end of September, a total of 15 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 50% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in PNTG over the last 21 quarters. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Royce & Associates held the most valuable stake in The Pennant Group, Inc. (NASDAQ:PNTG), which was worth $6.4 million at the end of the third quarter. On the second spot was Ancora Advisors which amassed $4.9 million worth of shares. Arrowstreet Capital, Citadel Investment Group, and Millennium Management 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 Integral Health Asset Management allocated the biggest weight to The Pennant Group, Inc. (NASDAQ:PNTG), around 0.88% of its 13F portfolio. Ancora Advisors is also relatively very bullish on the stock, setting aside 0.19 percent of its 13F equity portfolio to PNTG.
As industrywide interest jumped, key hedge funds were breaking ground themselves. Integral Health Asset Management, managed by Bhagwan Jay Rao, created the most outsized position in The Pennant Group, Inc. (NASDAQ:PNTG). Integral Health Asset Management had $2.9 million invested in the company at the end of the quarter. D. E. Shaw's D E Shaw also made a $0.8 million investment in the stock during the quarter. The other funds with brand new PNTG positions are Greg Eisner's Engineers Gate Manager, Brian Ashford-Russell and Tim Woolley's Polar Capital, and Sander Gerber's Hudson Bay Capital Management.
Let's check out hedge fund activity in other stocks similar to The Pennant Group, Inc. (NASDAQ:PNTG). These stocks are Linx S.A. (NYSE:LINX), Kaman Corporation (NYSE:KAMN), NextPoint Residential Trust Inc (NYSE:NXRT), Deluxe Corporation (NYSE:DLX), Atkore International Group Inc. (NYSE:ATKR), Karyopharm Therapeutics Inc (NASDAQ:KPTI), and PC Connection, Inc. (NASDAQ:CNXN). This group of stocks' market values resemble PNTG's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position LINX,5,33977,2 KAMN,12,138073,-1 NXRT,9,69227,-4 DLX,20,69029,2 ATKR,17,60246,3 KPTI,21,325726,0 CNXN,4,30286,-4 Average,12.6,103795,-0.3 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 12.6 hedge funds with bullish positions and the average amount invested in these stocks was $104 million. That figure was $31 million in PNTG's case. Karyopharm Therapeutics Inc (NASDAQ:KPTI) is the most popular stock in this table. On the other hand PC Connection, Inc. (NASDAQ:CNXN) is the least popular one with only 4 bullish hedge fund positions. The Pennant Group, Inc. (NASDAQ:PNTG) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for PNTG is 72.4. 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 30.7% in 2020 through December 14th and still beat the market by 15.8 percentage points. Hedge funds were also right about betting on PNTG as the stock returned 44.8% since the end of Q3 (through 12/14) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
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Disclosure: None. This article was originally published at Insider Monkey.