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Were Hedge Funds Right About Embracing Planet Fitness Inc (PLNT)?

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Reymerlyn Martin
·5 min read
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In this article we will take a look at whether hedge funds think Planet Fitness Inc (NYSE:PLNT) 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.

Planet Fitness Inc (NYSE:PLNT) shares haven't seen a lot of action during the second quarter. Overall, hedge fund sentiment was unchanged. The stock was in 44 hedge funds' portfolios at the end of the second quarter of 2020. Our calculations also showed that PLNT 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). At the end of this article we will also compare PLNT to other stocks including CubeSmart (NYSE:CUBE), Enel Chile S.A. (NYSE:ENIC), and Yamana Gold Inc. (NYSE:AUY) to get a better sense of its popularity.

Video: Watch our video about the top 5 most popular hedge fund stocks.

To most investors, hedge funds are assumed to be unimportant, old financial tools of the past. While there are more than 8000 funds with their doors open at the moment, We look at the moguls of this group, about 850 funds. It is estimated that this group of investors manage most of all hedge funds' total asset base, and by paying attention to their highest performing equity investments, Insider Monkey has unsheathed a few investment strategies that have historically outstripped the S&P 500 index. Insider Monkey's flagship short hedge fund strategy beat the S&P 500 short ETFs by around 20 percentage points annually since its inception in March 2017. Our portfolio of short stocks lost 34% since February 2017 (through August 17th) even though the market was up 53% during the same period. We just shared a list of 8 short targets in our latest quarterly update .

Eashwar Krishnan - Tybourne Capital
Eashwar Krishnan - Tybourne Capital

Eashwar Krishnan of Tybourne Capital Management

Now we're going to analyze the new hedge fund action regarding Planet Fitness Inc (NYSE:PLNT).

How are hedge funds trading Planet Fitness Inc (NYSE:PLNT)?

At the end of the second quarter, a total of 44 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from the previous quarter. On the other hand, there were a total of 38 hedge funds with a bullish position in PLNT a year ago. So, let's find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, SRS Investment Management was the largest shareholder of Planet Fitness Inc (NYSE:PLNT), with a stake worth $299.8 million reported as of the end of September. Trailing SRS Investment Management was Steadfast Capital Management, which amassed a stake valued at $217.6 million. Tybourne Capital Management, Samlyn Capital, and Arrowstreet Capital 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 Pelham Capital allocated the biggest weight to Planet Fitness Inc (NYSE:PLNT), around 7.17% of its 13F portfolio. Broad Bay Capital is also relatively very bullish on the stock, dishing out 7.01 percent of its 13F equity portfolio to PLNT.

Judging by the fact that Planet Fitness Inc (NYSE:PLNT) has faced a decline in interest from hedge fund managers, it's easy to see that there were a few hedge funds who sold off their positions entirely last quarter. It's worth mentioning that David Gallo's Valinor Management LLC dropped the biggest position of the "upper crust" of funds monitored by Insider Monkey, totaling about $62.5 million in stock. Robert Boucai's fund, Newbrook Capital Advisors, also cut its stock, about $29.1 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).

Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Planet Fitness Inc (NYSE:PLNT) but similarly valued. These stocks are CubeSmart (NYSE:CUBE), Enel Chile S.A. (NYSE:ENIC), Yamana Gold Inc. (NYSE:AUY), Vedanta Ltd (NYSE:VEDL), Hess Midstream LP (NYSE:HESM), Tech Data Corp (NASDAQ:TECD), and IAA, Inc. (NYSE:IAA). This group of stocks' market valuations are similar to PLNT's market valuation.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CUBE,24,211307,6 ENIC,5,15818,-3 AUY,18,407399,4 VEDL,9,46209,-2 HESM,6,11545,1 TECD,17,307359,-22 IAA,43,1326469,4 Average,17.4,332301,-1.7 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 17.4 hedge funds with bullish positions and the average amount invested in these stocks was $332 million. That figure was $1254 million in PLNT's case. IAA, Inc. (NYSE:IAA) is the most popular stock in this table. On the other hand Enel Chile S.A. (NYSE:ENIC) is the least popular one with only 5 bullish hedge fund positions. Compared to these stocks Planet Fitness Inc (NYSE:PLNT) is more popular among hedge funds. Our overall hedge fund sentiment score for PLNT is 85. 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 30% in 2020 through October 23rd and still managed to beat the market by 21 percentage points. Hedge funds were also right about betting on PLNT, though not to the same extent, as the stock returned 13% since the end of June (through October 23rd) and outperformed the market as well.

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Disclosure: None. This article was originally published at Insider Monkey.

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