U.S. Markets closed

Is Portman Ridge Finance Corporation (PTMN) A Good Stock To Buy?

Asma UL Husna

Hedge Funds and other institutional investors have just completed filing their 13Fs with the Securities and Exchange Commission, revealing their equity portfolios as of the end of June. At Insider Monkey, we follow nearly 750 active hedge funds and notable investors and by analyzing their 13F filings, we can determine the stocks that they are collectively bullish on. One of their picks is Portman Ridge Finance Corporation (NASDAQ:PTMN), so let’s take a closer look at the sentiment that surrounds it in the current quarter.

Is Portman Ridge Finance Corporation (NASDAQ:PTMN) the right investment to pursue these days? Prominent investors are getting less bullish. The number of bullish hedge fund bets went down by 1 recently. Our calculations also showed that PTMN isn't among the 30 most popular stocks among hedge funds. PTMN was in 3 hedge funds' portfolios at the end of the third quarter of 2019. There were 4 hedge funds in our database with PTMN positions at the end of the previous quarter.

If you'd ask most stock holders, hedge funds are viewed as unimportant, outdated investment tools of years past. While there are greater than 8000 funds with their doors open at present, We look at the upper echelon of this group, about 750 funds. Most estimates calculate that this group of people handle the lion's share of the hedge fund industry's total asset base, and by tracking their unrivaled investments, Insider Monkey has found a few investment strategies that have historically exceeded the market. Insider Monkey's flagship short hedge fund strategy beat the S&P 500 short ETFs by around 20 percentage points per year since its inception in May 2014. Our portfolio of short stocks lost 27.8% since February 2017 (through November 21st) even though the market was up more than 39% during the same period. We just shared a list of 7 short targets in our latest quarterly update .

[caption id="attachment_673876" align="aligncenter" width="473"] John Overdeck of Two Sigma Advisors[/caption]

John Overdeck of Two Sigma

Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world's most bearish hedge fund that's more convinced than ever that a crash is coming, our long-short investment strategy doesn't rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds' buy/sell signals. Let's analyze the fresh hedge fund action surrounding Portman Ridge Finance Corporation (NASDAQ:PTMN).

What does smart money think about Portman Ridge Finance Corporation (NASDAQ:PTMN)?

At the end of the third quarter, a total of 3 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -25% from the previous quarter. The graph below displays the number of hedge funds with bullish position in PTMN over the last 17 quarters. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

PTMN_nov2019

More specifically, Arrowstreet Capital was the largest shareholder of Portman Ridge Finance Corporation (NASDAQ:PTMN), with a stake worth $0.9 million reported as of the end of September. Trailing Arrowstreet Capital was Two Sigma Advisors, which amassed a stake valued at $0.2 million. Citadel Investment Group was 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 Arrowstreet Capital allocated the biggest weight to Portman Ridge Finance Corporation (NASDAQ:PTMN), around 0.0021% of its portfolio. Two Sigma Advisors is also relatively very bullish on the stock, setting aside 0.0004 percent of its 13F equity portfolio to PTMN.

We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Bulldog Investors. One hedge fund selling its entire position doesn't always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don't think this is the case in this case because none of the 750+ hedge funds tracked by Insider Monkey identified PTMN as a viable investment and initiated a position in the stock.

Let's check out hedge fund activity in other stocks similar to Portman Ridge Finance Corporation (NASDAQ:PTMN). We will take a look at MSB Financial Corp. (NASDAQ:MSBF), Jerash Holdings (US), Inc. (NASDAQ:JRSH), J. Jill, Inc. (NYSE:JILL), and Destination XL Group Inc (NASDAQ:DXLG). This group of stocks' market caps are similar to PTMN's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position MSBF,3,13893,0 JRSH,3,1469,2 JILL,6,2206,-2 DXLG,6,31087,-1 Average,4.5,12164,-0.25 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 4.5 hedge funds with bullish positions and the average amount invested in these stocks was $12 million. That figure was $1 million in PTMN's case. J. Jill, Inc. (NYSE:JILL) is the most popular stock in this table. On the other hand MSB Financial Corp. (NASDAQ:MSBF) is the least popular one with only 3 bullish hedge fund positions. Compared to these stocks Portman Ridge Finance Corporation (NASDAQ:PTMN) is even less popular than MSBF. Hedge funds dodged a bullet by taking a bearish stance towards PTMN. Our calculations showed that the top 20 most popular hedge fund stocks returned 34.7% in 2019 through November 22nd and outperformed the S&P 500 ETF (SPY) by 8.5 percentage points. Unfortunately PTMN wasn't nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); PTMN investors were disappointed as the stock returned -4.6% during the fourth quarter (through 11/22) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as 70 percent of these stocks already outperformed the market so far in Q4.

Disclosure: None. This article was originally published at Insider Monkey.

Related Content