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In this article we will take a look at whether hedge funds think Parsons Corporation (NYSE:PSN) 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 PSN a good stock to buy now? Parsons Corporation (NYSE:PSN) was in 16 hedge funds' portfolios at the end of September. The all time high for this statistic is 15. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. PSN investors should pay attention to an increase in hedge fund sentiment of late. There were 15 hedge funds in our database with PSN positions at the end of the second quarter. Our calculations also showed that PSN 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.
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 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'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 17th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Paul Marshall of Marshall Wace
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. With all of this in mind we're going to analyze the new hedge fund action encompassing Parsons Corporation (NYSE:PSN).
Do Hedge Funds Think PSN Is A Good Stock To Buy Now?
Heading into the fourth quarter of 2020, a total of 16 of the hedge funds tracked by Insider Monkey were long this stock, a change of 7% from the previous quarter. On the other hand, there were a total of 13 hedge funds with a bullish position in PSN a year ago. With hedge funds' capital changing hands, there exists a few noteworthy hedge fund managers who were adding to their stakes considerably (or already accumulated large positions).
More specifically, Alkeon Capital Management was the largest shareholder of Parsons Corporation (NYSE:PSN), with a stake worth $35.2 million reported as of the end of September. Trailing Alkeon Capital Management was Arrowstreet Capital, which amassed a stake valued at $14.3 million. Marshall Wace LLP, Point72 Asset Management, and Brant Point Investment 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 Clearline Capital allocated the biggest weight to Parsons Corporation (NYSE:PSN), around 0.5% of its 13F portfolio. Brant Point Investment Management is also relatively very bullish on the stock, earmarking 0.43 percent of its 13F equity portfolio to PSN.
As industrywide interest jumped, key money managers have been driving this bullishness. Marshall Wace LLP, managed by Paul Marshall and Ian Wace, established the largest position in Parsons Corporation (NYSE:PSN). Marshall Wace LLP had $8 million invested in the company at the end of the quarter. Steve Cohen's Point72 Asset Management also made a $8 million investment in the stock during the quarter. The other funds with new positions in the stock are Paul Tudor Jones's Tudor Investment Corp, Marc Majzner's Clearline Capital, and Dmitry Balyasny's Balyasny Asset Management.
Let's check out hedge fund activity in other stocks - not necessarily in the same industry as Parsons Corporation (NYSE:PSN) but similarly valued. These stocks are Vertex, Inc. (NASDAQ:VERX), Watts Water Technologies Inc (NYSE:WTS), Cloudera, Inc. (NYSE:CLDR), PS Business Parks Inc (NYSE:PSB), Hudson Pacific Properties Inc (NYSE:HPP), Black Hills Corporation (NYSE:BKH), and Inari Medical, Inc. (NASDAQ:NARI). All of these stocks' market caps match PSN's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position VERX,15,97006,15 WTS,18,277904,-7 CLDR,31,768674,-2 PSB,17,83110,-3 HPP,17,311969,-7 BKH,22,128780,0 NARI,14,105958,-5 Average,19.1,253343,-1.3 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 19.1 hedge funds with bullish positions and the average amount invested in these stocks was $253 million. That figure was $85 million in PSN's case. Cloudera, Inc. (NYSE:CLDR) is the most popular stock in this table. On the other hand Inari Medical, Inc. (NASDAQ:NARI) is the least popular one with only 14 bullish hedge fund positions. Parsons Corporation (NYSE:PSN) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for PSN is 41.9. 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. This is a slightly negative signal and we'd rather spend our time researching stocks that hedge funds are piling on. 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 surpassed the market again by 15.8 percentage points. Unfortunately PSN wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); PSN investors were disappointed as the stock returned 4.1% since the end of September (through 12/14) 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 most of these stocks already outperformed the market in 2020.
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Disclosure: None. This article was originally published at Insider Monkey.