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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. Insider Monkey finished processing 817 13F filings submitted by hedge funds and prominent investors. These filings show these funds' portfolio positions as of September 30th, 2020. In this article we are going to take a look at smart money sentiment towards Party City Holdco Inc (NYSE:PRTY).
Is PRTY a good stock to buy now? Party City Holdco Inc (NYSE:PRTY) was in 12 hedge funds' portfolios at the end of the third quarter of 2020. The all time high for this statistics is 19. PRTY shareholders have witnessed a decrease in support from the world's most elite money managers in recent months. There were 14 hedge funds in our database with PRTY positions at the end of the second quarter. Our calculations also showed that PRTY 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.
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 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. Even if you aren't comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
John Overdeck of Two Sigma Advisors
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 let's analyze the fresh hedge fund action surrounding Party City Holdco Inc (NYSE:PRTY).
Do Hedge Funds Think PRTY Is A Good Stock To Buy Now?
Heading into the fourth quarter of 2020, a total of 12 of the hedge funds tracked by Insider Monkey were long this stock, a change of -14% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards PRTY over the last 21 quarters. With hedge funds' positions undergoing their usual ebb and flow, there exists a few notable hedge fund managers who were increasing their stakes considerably (or already accumulated large positions).
More specifically, CAS Investment Partners was the largest shareholder of Party City Holdco Inc (NYSE:PRTY), with a stake worth $32 million reported as of the end of September. Trailing CAS Investment Partners was Millennium Management, which amassed a stake valued at $5.6 million. Arrowstreet Capital, Two Sigma Advisors, and Nantahala Capital 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 CAS Investment Partners allocated the biggest weight to Party City Holdco Inc (NYSE:PRTY), around 2.21% of its 13F portfolio. Clearline Capital is also relatively very bullish on the stock, designating 0.28 percent of its 13F equity portfolio to PRTY.
Since Party City Holdco Inc (NYSE:PRTY) has faced declining sentiment from the entirety of the hedge funds we track, it's safe to say that there exists a select few hedge funds who were dropping their positions entirely by the end of the third quarter. Intriguingly, Cliff Asness's AQR Capital Management sold off the biggest investment of the 750 funds watched by Insider Monkey, worth about $0.8 million in stock, and Donald Sussman's Paloma Partners was right behind this move, as the fund said goodbye to about $0.5 million worth. These bearish behaviors are important to note, as total hedge fund interest was cut by 2 funds by the end of the third quarter.
Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as Party City Holdco Inc (NYSE:PRTY) but similarly valued. These stocks are Gold Standard Ventures Corp (NYSE:GSV), Lannett Company, Inc. (NYSE:LCI), Paratek Pharmaceuticals Inc (NASDAQ:PRTK), America First Multifamily Investors, L.P. (NASDAQ:ATAX), Rafael Holdings, Inc. (NYSE:RFL), Atlantic Capital Bancshares, Inc. (NASDAQ:ACBI), and Tecnoglass Inc. (NASDAQ:TGLS). All of these stocks' market caps are similar to PRTY's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position GSV,7,21541,2 LCI,10,26062,1 PRTK,9,19459,-3 ATAX,1,607,-1 RFL,5,27053,0 ACBI,14,35844,0 TGLS,3,6551,-1 Average,7,19588,-0.3 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 7 hedge funds with bullish positions and the average amount invested in these stocks was $20 million. That figure was $49 million in PRTY's case. Atlantic Capital Bancshares, Inc. (NASDAQ:ACBI) is the most popular stock in this table. On the other hand America First Multifamily Investors, L.P. (NASDAQ:ATAX) is the least popular one with only 1 bullish hedge fund positions. Party City Holdco Inc (NYSE:PRTY) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for PRTY is 64.3. 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 32.9% in 2020 through December 8th and still beat the market by 16.2 percentage points. Hedge funds were also right about betting on PRTY as the stock returned 103.5% since the end of Q3 (through 12/8) 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.