In this article we will take a look at whether hedge funds think The Providence Service Corporation (NASDAQ:PRSC) is a good investment right now. We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, unconventional data sources, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.
Is PRSC a good stock to buy now? Money managers were in a bullish mood. The number of bullish hedge fund positions went up by 3 lately. The Providence Service Corporation (NASDAQ:PRSC) was in 15 hedge funds' portfolios at the end of September. The all time high for this statistic is 17. Our calculations also showed that PRSC 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).
Video: Watch our video about the top 5 most popular hedge fund stocks.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey's monthly stock picks returned 113% since March 2017 and outperformed the S&P 500 ETFs by more than 66 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
David Harding of Winton Capital Management
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 check out the latest hedge fund action surrounding The Providence Service Corporation (NASDAQ:PRSC).
Do Hedge Funds Think PRSC Is A Good Stock To Buy Now?
Heading into the fourth quarter of 2020, a total of 15 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 25% from the previous quarter. On the other hand, there were a total of 16 hedge funds with a bullish position in PRSC a year ago. So, let's find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Coliseum Capital was the largest shareholder of The Providence Service Corporation (NASDAQ:PRSC), with a stake worth $166.8 million reported as of the end of September. Trailing Coliseum Capital was Renaissance Technologies, which amassed a stake valued at $78.4 million. Cardinal Capital, Polar Capital, and Citadel Investment Group 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 Coliseum Capital allocated the biggest weight to The Providence Service Corporation (NASDAQ:PRSC), around 17.83% of its 13F portfolio. Cardinal Capital is also relatively very bullish on the stock, earmarking 1.74 percent of its 13F equity portfolio to PRSC.
Now, key money managers have jumped into The Providence Service Corporation (NASDAQ:PRSC) headfirst. Polar Capital, managed by Brian Ashford-Russell and Tim Woolley, established the largest position in The Providence Service Corporation (NASDAQ:PRSC). Polar Capital had $11.1 million invested in the company at the end of the quarter. David Harding's Winton Capital Management also initiated a $2.9 million position during the quarter. The following funds were also among the new PRSC investors: Noam Gottesman's GLG Partners, Alec Litowitz and Ross Laser's Magnetar Capital, and Benjamin A. Smith's Laurion Capital Management.
Let's check out hedge fund activity in other stocks similar to The Providence Service Corporation (NASDAQ:PRSC). We will take a look at Glu Mobile Inc. (NASDAQ:GLUU), Capitol Federal Financial, Inc. (NASDAQ:CFFN), Coherus Biosciences Inc (NASDAQ:CHRS), Piper Sandler Companies (NYSE:PIPR), Service Properties Trust (NASDAQ:SVC), Zentalis Pharmaceuticals, Inc. (NASDAQ:ZNTL), and Whiting Petroleum Corporation (NYSE:WLL). This group of stocks' market values resemble PRSC's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position GLUU,26,169466,-9 CFFN,14,80710,3 CHRS,24,224914,-2 PIPR,14,45238,1 SVC,15,79288,-6 ZNTL,14,599791,3 WLL,18,131921,12 Average,17.9,190190,0.3 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 17.9 hedge funds with bullish positions and the average amount invested in these stocks was $190 million. That figure was $321 million in PRSC's case. Glu Mobile Inc. (NASDAQ:GLUU) is the most popular stock in this table. On the other hand Capitol Federal Financial, Inc. (NASDAQ:CFFN) is the least popular one with only 14 bullish hedge fund positions. The Providence Service Corporation (NASDAQ:PRSC) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for PRSC is 38.6. 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. A small number of hedge funds were also right about betting on PRSC as the stock returned 41.7% since the end of the third quarter (through 12/14) 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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