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In this article we will check out the progression of hedge fund sentiment towards Papa John's International, Inc. (NASDAQ:PZZA) and determine whether it is a good investment right now. We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also employ numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.
Is PZZA stock a buy? Papa John's International, Inc. (NASDAQ:PZZA) was in 32 hedge funds' portfolios at the end of the fourth quarter of 2020. The all time high for this statistic is 38. PZZA investors should pay attention to a decrease in support from the world's most elite money managers lately. There were 38 hedge funds in our database with PZZA positions at the end of the third quarter. Our calculations also showed that PZZA isn't among the 30 most popular stocks among hedge funds (click for Q4 rankings).
In the financial world there are many metrics shareholders employ to appraise publicly traded companies. A pair of the most under-the-radar metrics are hedge fund and insider trading activity. Our researchers have shown that, historically, those who follow the best picks of the best fund managers can beat the S&P 500 by a healthy amount (see the details here).
Dmitry Balyasny of Balyasny Asset Management
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Do Hedge Funds Think PZZA Is A Good Stock To Buy Now?
At Q4's end, a total of 32 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -16% from one quarter earlier. By comparison, 28 hedge funds held shares or bullish call options in PZZA a year ago. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Renaissance Technologies held the most valuable stake in Papa John's International, Inc. (NASDAQ:PZZA), which was worth $73.3 million at the end of the fourth quarter. On the second spot was Citadel Investment Group which amassed $44.8 million worth of shares. Balyasny Asset Management, Arrowstreet Capital, and Two Sigma Advisors 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 Franklin Street Capital allocated the biggest weight to Papa John's International, Inc. (NASDAQ:PZZA), around 12.09% of its 13F portfolio. Stamina Capital Management is also relatively very bullish on the stock, setting aside 4.8 percent of its 13F equity portfolio to PZZA.
Because Papa John's International, Inc. (NASDAQ:PZZA) has witnessed falling interest from the aggregate hedge fund industry, logic holds that there was a specific group of hedge funds that elected to cut their full holdings in the fourth quarter. It's worth mentioning that Ryan Frick and Oliver Evans's Dorsal Capital Management cut the biggest stake of all the hedgies watched by Insider Monkey, valued at an estimated $32.9 million in stock. Paul Marshall and Ian Wace's fund, Marshall Wace LLP, also dumped its stock, about $9.5 million worth. These moves are important to note, as aggregate hedge fund interest fell by 6 funds in the fourth quarter.
Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as Papa John's International, Inc. (NASDAQ:PZZA) but similarly valued. These stocks are Harmony Gold Mining Co. (NYSE:HMY), Beacon Roofing Supply, Inc. (NASDAQ:BECN), Nu Skin Enterprises, Inc. (NYSE:NUS), Renewable Energy Group Inc (NASDAQ:REGI), Weingarten Realty Investors (NYSE:WRI), Tower Semiconductor Ltd. (NASDAQ:TSEM), and Avista Corp (NYSE:AVA). This group of stocks' market values are similar to PZZA's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position HMY,10,35708,0 BECN,23,369122,0 NUS,22,328076,0 REGI,16,66825,-14 WRI,13,146632,-1 TSEM,17,423731,3 AVA,10,60314,-10 Average,15.9,204344,-3.1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 15.9 hedge funds with bullish positions and the average amount invested in these stocks was $204 million. That figure was $367 million in PZZA's case. Beacon Roofing Supply, Inc. (NASDAQ:BECN) is the most popular stock in this table. On the other hand Harmony Gold Mining Co. (NYSE:HMY) is the least popular one with only 10 bullish hedge fund positions. Compared to these stocks Papa John's International, Inc. (NASDAQ:PZZA) is more popular among hedge funds. Our overall hedge fund sentiment score for PZZA is 74.3. 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 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 12.2% in 2021 through April 12th and still managed to beat the market by 1.5 percentage points. Hedge funds were also right about betting on PZZA, though not to the same extent, as the stock returned 10.8% since the end of December (through April 12th) and outperformed the market as well.
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Disclosure: None. This article was originally published at Insider Monkey.