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Is PRSP Stock A Buy or Sell?

We at Insider Monkey have gone over 887 13F filings that hedge funds and prominent investors are required to file by the SEC The 13F filings show the funds' and investors' portfolio positions as of December 31st. In this article, we look at what those funds think of Perspecta Inc. (NYSE:PRSP) based on that data.

Is PRSP stock a buy? Hedge funds were getting more optimistic. The number of bullish hedge fund bets improved by 1 recently. Perspecta Inc. (NYSE:PRSP) was in 37 hedge funds' portfolios at the end of December. The all time high for this statistic is 50. Our calculations also showed that PRSP isn't among the 30 most popular stocks among hedge funds (click for Q4 rankings).

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 124 percentage points since March 2017 (see the details here).

Barry Rosenstein - Jana Partners
Barry Rosenstein - Jana Partners

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, the House passed a landmark bill decriminalizing marijuana. So, we are checking out this under the radar cannabis stock right now. We go through lists like the 10 best battery stocks to buy to identify the next stock with 10x upside potential. 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. With all of this in mind we're going to take a glance at the new hedge fund action regarding Perspecta Inc. (NYSE:PRSP).

Do Hedge Funds Think PRSP Is A Good Stock To Buy Now?

At Q4's end, a total of 37 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 3% from the third quarter of 2020. Below, you can check out the change in hedge fund sentiment towards PRSP over the last 22 quarters. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is PRSP A Good Stock To Buy?
Is PRSP A Good Stock To Buy?

More specifically, JANA Partners was the largest shareholder of Perspecta Inc. (NYSE:PRSP), with a stake worth $368.1 million reported as of the end of December. Trailing JANA Partners was Maverick Capital, which amassed a stake valued at $109.9 million. D E Shaw, Point72 Asset Management, 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 JANA Partners allocated the biggest weight to Perspecta Inc. (NYSE:PRSP), around 24.92% of its 13F portfolio. Lion Point is also relatively very bullish on the stock, designating 5.8 percent of its 13F equity portfolio to PRSP.

Now, key hedge funds were leading the bulls' herd. Balyasny Asset Management, managed by Dmitry Balyasny, created the largest position in Perspecta Inc. (NYSE:PRSP). Balyasny Asset Management had $16.4 million invested in the company at the end of the quarter. Carl Tiedemann and Michael Tiedemann's TIG Advisors also initiated a $3.6 million position during the quarter. The other funds with new positions in the stock are Brandon Haley's Holocene Advisors, Matthew Hulsizer's PEAK6 Capital Management, and Jinghua Yan's TwinBeech Capital.

Let's now review hedge fund activity in other stocks similar to Perspecta Inc. (NYSE:PRSP). We will take a look at Itron, Inc. (NASDAQ:ITRI), Tripadvisor Inc (NASDAQ:TRIP), Hawaiian Electric Industries, Inc. (NYSE:HE), DCP Midstream LP (NYSE:DCP), Black Hills Corporation (NYSE:BKH), Wyndham Destinations, Inc. (NYSE:WYND), and Velodyne Lidar, Inc. (NASDAQ:VLDR). This group of stocks' market valuations are closest to PRSP's market valuation.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position ITRI,6,275348,-9 TRIP,41,1085144,12 HE,18,169156,-1 DCP,3,12973,0 BKH,19,152822,-3 WYND,29,588842,0 VLDR,16,94202,3 Average,18.9,339784,0.3 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 18.9 hedge funds with bullish positions and the average amount invested in these stocks was $340 million. That figure was $935 million in PRSP's case. Tripadvisor Inc (NASDAQ:TRIP) is the most popular stock in this table. On the other hand DCP Midstream LP (NYSE:DCP) is the least popular one with only 3 bullish hedge fund positions. Perspecta Inc. (NYSE:PRSP) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for PRSP is 72.9. 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 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks gained 7.9% in 2021 through April 1st and still beat the market by 0.4 percentage points. Hedge funds were also right about betting on PRSP as the stock returned 21% since the end of Q4 (through 4/1) 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.

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