Hedge funds and large money managers usually invest with a focus on the long-term horizon and, therefore, short-lived dips or bumps on the charts, usually don't make them change their opinion towards a company. This time it may be different. During the fourth quarter of 2018 we observed increased volatility and small-cap stocks underperformed the market. Things completely reversed during the first quarter. Hedge fund investor letters indicated that they are cutting their overall exposure, closing out some position and doubling down on others. Let’s take a look at the hedge fund sentiment towards Presidio, Inc. (NASDAQ:PSDO) to find out whether it was one of their high conviction long-term ideas.
Presidio, Inc. (NASDAQ:PSDO) investors should pay attention to an increase in enthusiasm from smart money lately. Our calculations also showed that PSDO isn't among the 30 most popular stocks among hedge funds.
Hedge funds' reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn't keep up with the unhedged returns of the market indices. 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 market by 40 percentage points since May 2014 through May 30, 2019 (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.
We're going to take a look at the recent hedge fund action encompassing Presidio, Inc. (NASDAQ:PSDO).
How are hedge funds trading Presidio, Inc. (NASDAQ:PSDO)?
At the end of the first quarter, a total of 25 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 317% from the previous quarter. The graph below displays the number of hedge funds with bullish position in PSDO over the last 15 quarters. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Presidio, Inc. (NASDAQ:PSDO) was held by Arrowstreet Capital, which reported holding $11.1 million worth of stock at the end of March. It was followed by Marshall Wace LLP with a $8.9 million position. Other investors bullish on the company included Luminus Management, D E Shaw, and Renaissance Technologies.
With a general bullishness amongst the heavyweights, some big names were breaking ground themselves. Marshall Wace LLP, managed by Paul Marshall and Ian Wace, established the most valuable position in Presidio, Inc. (NASDAQ:PSDO). Marshall Wace LLP had $8.9 million invested in the company at the end of the quarter. Jonathan Barrett and Paul Segal's Luminus Management also made a $7.8 million investment in the stock during the quarter. The following funds were also among the new PSDO investors: D. E. Shaw's D E Shaw, Jim Simons's Renaissance Technologies, and Andrew Feldstein and Stephen Siderow's Blue Mountain Capital.
Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as Presidio, Inc. (NASDAQ:PSDO) but similarly valued. We will take a look at Monmouth R.E. Inv. Corp. (NYSE:MNR), Hercules Capital, Inc. (NYSE:HTGC), CorVel Corporation (NASDAQ:CRVL), and PRA Group, Inc. (NASDAQ:PRAA). This group of stocks' market valuations resemble PSDO's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position MNR,9,57010,0 HTGC,10,9623,-1 CRVL,16,120959,1 PRAA,11,34936,1 Average,11.5,55632,0.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 11.5 hedge funds with bullish positions and the average amount invested in these stocks was $56 million. That figure was $58 million in PSDO's case. CorVel Corporation (NASDAQ:CRVL) is the most popular stock in this table. On the other hand Monmouth R.E. Inv. Corp. (NYSE:MNR) is the least popular one with only 9 bullish hedge fund positions. Compared to these stocks Presidio, Inc. (NASDAQ:PSDO) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 1.9% in Q2 through May 30th and outperformed the S&P 500 ETF (SPY) by more than 3 percentage points. Unfortunately PSDO wasn't nearly as popular as these 20 stocks and hedge funds that were betting on PSDO were disappointed as the stock returned -8.4% during the same period 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 13 of these stocks already outperformed the market in Q2.
Disclosure: None. This article was originally published at Insider Monkey.