Is PROS Holdings, Inc. (PRO) Going to Burn These Hedge Funds?
The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 821 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds' and investors' portfolio positions as of March 31st, a week after the market trough. In this article we look at what those investors think of PROS Holdings, Inc. (NYSE:PRO).
Is PROS Holdings, Inc. (NYSE:PRO) a healthy stock for your portfolio? The best stock pickers are getting less optimistic. The number of bullish hedge fund positions decreased by 4 recently. Our calculations also showed that PRO 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). PRO was in 16 hedge funds' portfolios at the end of the first quarter of 2020. There were 20 hedge funds in our database with PRO holdings at the end of the previous quarter.
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_364863" align="aligncenter" width="400"]
David Atterbury of Whetstone Capital Advisors[/caption]
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, blockchain technology's influence will go beyond online payments. So, we are checking out this futurist's moonshot opportunities in tech stocks. We interview hedge fund managers and ask them about their best ideas. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. For example we are checking out stocks recommended/scorned by legendary Bill Miller. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind we're going to review the key hedge fund action surrounding PROS Holdings, Inc. (NYSE:PRO).
What does smart money think about PROS Holdings, Inc. (NYSE:PRO)?
Heading into the second quarter of 2020, a total of 16 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -20% from the fourth quarter of 2019. The graph below displays the number of hedge funds with bullish position in PRO over the last 18 quarters. With hedge funds' capital changing hands, there exists an "upper tier" of notable hedge fund managers who were boosting their stakes substantially (or already accumulated large positions).
More specifically, Tremblant Capital was the largest shareholder of PROS Holdings, Inc. (NYSE:PRO), with a stake worth $66.8 million reported as of the end of September. Trailing Tremblant Capital was Renaissance Technologies, which amassed a stake valued at $34.2 million. Whetstone Capital Advisors, Two Sigma Advisors, and Akaris Global 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 Whetstone Capital Advisors allocated the biggest weight to PROS Holdings, Inc. (NYSE:PRO), around 6.41% of its 13F portfolio. Tremblant Capital is also relatively very bullish on the stock, dishing out 4.2 percent of its 13F equity portfolio to PRO.
Judging by the fact that PROS Holdings, Inc. (NYSE:PRO) has faced a decline in interest from the smart money, it's safe to say that there was a specific group of hedge funds that slashed their positions entirely heading into Q4. Interestingly, Brian Ashford-Russell and Tim Woolley's Polar Capital sold off the largest investment of the 750 funds monitored by Insider Monkey, totaling an estimated $37.4 million in stock, and Spencer M. Waxman's Shannon River Fund Management was right behind this move, as the fund sold off about $29.9 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest fell by 4 funds heading into Q4.
Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as PROS Holdings, Inc. (NYSE:PRO) but similarly valued. We will take a look at Visteon Corp (NYSE:VC), Korn Ferry (NYSE:KFY), ProAssurance Corporation (NYSE:PRA), and Silicon Motion Technology Corp. (NASDAQ:SIMO). This group of stocks' market caps are closest to PRO's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position VC,19,152241,-10 KFY,20,136009,1 PRA,10,124328,-8 SIMO,18,214067,1 Average,16.75,156661,-4 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 16.75 hedge funds with bullish positions and the average amount invested in these stocks was $157 million. That figure was $151 million in PRO's case. Korn Ferry (NYSE:KFY) is the most popular stock in this table. On the other hand ProAssurance Corporation (NYSE:PRA) is the least popular one with only 10 bullish hedge fund positions. PROS Holdings, Inc. (NYSE:PRO) is not the least popular stock in this group but hedge fund interest is still below average. 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 13.3% in 2020 through June 25th and still beat the market by 16.8 percentage points. A small number of hedge funds were also right about betting on PRO as the stock returned 48.3% during the second quarter and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.
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