Was The Smart Money Right About Getting Into Pool Corporation (POOL)?
Is Pool Corporation (NASDAQ:POOL) a good place to invest some of your money right now? We can gain invaluable insight to help us answer that question by studying the investment trends of top investors, who employ world-class Ivy League graduates, who are given immense resources and industry contacts to put their financial expertise to work. The top picks of these firms have historically outperformed the market when we account for known risk factors, making them very valuable investment ideas.
Pool Corporation (NASDAQ:POOL) has seen an increase in hedge fund interest of late. Pool Corporation (NASDAQ:POOL) was in 35 hedge funds' portfolios at the end of the second quarter of 2020. The all time high for this statistics is 33. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. There were 33 hedge funds in our database with POOL positions at the end of the first quarter. Our calculations also showed that POOL isn't among the 30 most popular stocks among hedge funds (click for Q2 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 101% since March 2017 and outperformed the S&P 500 ETFs by more than 56 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.
Blair Levinsky of Waratah Capital Advisors
At Insider Monkey we scour multiple sources to uncover the next great investment idea. Last week, most investors overlooked a major development because of the presidential elections: Oregon became the first state to legalize psychedelic mushrooms which are shown to have promising results in treating depression, addiction, and PTSD in early stage academic studies. So, we are checking out this psychedelic drug stock idea right now. We go through lists like the 10 most profitable companies in the world 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 to get excerpts of these letters in your inbox. Keeping this in mind let's check out the new hedge fund action surrounding Pool Corporation (NASDAQ:POOL).
Hedge fund activity in Pool Corporation (NASDAQ:POOL)
At the end of the second quarter, a total of 35 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 6% from one quarter earlier. By comparison, 22 hedge funds held shares or bullish call options in POOL 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.
More specifically, Fisher Asset Management was the largest shareholder of Pool Corporation (NASDAQ:POOL), with a stake worth $82.5 million reported as of the end of June. Trailing Fisher Asset Management was Impax Asset Management, which amassed a stake valued at $79.2 million. Echo Street Capital Management, Select Equity Group, and Chilton Investment Company 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 Aubrey Capital Management allocated the biggest weight to Pool Corporation (NASDAQ:POOL), around 3.92% of its 13F portfolio. Chilton Investment Company is also relatively very bullish on the stock, dishing out 1.49 percent of its 13F equity portfolio to POOL.
With a general bullishness amongst the heavyweights, key hedge funds have jumped into Pool Corporation (NASDAQ:POOL) headfirst. Kerrisdale Capital, managed by Sahm Adrangi, established the most valuable position in Pool Corporation (NASDAQ:POOL). Kerrisdale Capital had $9.2 million invested in the company at the end of the quarter. Brad Dunkley and Blair Levinsky's Waratah Capital Advisors also made a $5.3 million investment in the stock during the quarter. The following funds were also among the new POOL investors: Mark Coe's Intrinsic Edge Capital, Michael Cowley's Sandbar Asset Management, and Ben Levine, Andrew Manuel and Stefan Renold's LMR Partners.
Let's now review hedge fund activity in other stocks - not necessarily in the same industry as Pool Corporation (NASDAQ:POOL) but similarly valued. These stocks are KB Financial Group, Inc. (NYSE:KB), Alteryx, Inc. (NYSE:AYX), Gartner Inc (NYSE:IT), Trimble Inc. (NASDAQ:TRMB), VICI Properties Inc. (NYSE:VICI), Citizens Financial Group Inc (NYSE:CFG), and StoneCo Ltd. (NASDAQ:STNE). This group of stocks' market caps resemble POOL's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position KB,6,36329,-1 AYX,48,1612975,5 IT,32,1302132,0 TRMB,26,979865,6 VICI,51,1573468,15 CFG,47,841328,1 STNE,35,1342781,1 Average,35,1098411,3.9 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 35 hedge funds with bullish positions and the average amount invested in these stocks was $1098 million. That figure was $492 million in POOL's case. VICI Properties Inc. (NYSE:VICI) is the most popular stock in this table. On the other hand KB Financial Group, Inc. (NYSE:KB) is the least popular one with only 6 bullish hedge fund positions. Pool Corporation (NASDAQ:POOL) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for POOL is 69.2. 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 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 23% in 2020 through October 30th and still beat the market by 20.1 percentage points. A small number of hedge funds were also right about betting on POOL as the stock returned 28.9% since the end of the second quarter (through 10/30) 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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