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Last year we predicted the arrival of the first US recession since 2009 and we told in advance that the market will decline by at least 20% in (Recession is Imminent: We Need A Travel Ban NOW). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards Pilgrim's Pride Corporation (NASDAQ:PPC).
Is Pilgrim's Pride Corporation (NASDAQ:PPC) an attractive stock to buy now? Hedge funds were cutting their exposure. The number of bullish hedge fund positions dropped by 1 lately. Pilgrim's Pride Corporation (NASDAQ:PPC) was in 16 hedge funds' portfolios at the end of March. The all time high for this statistic is 28. Our calculations also showed that PPC isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings).
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 206.8% since March 2017 and outperformed the S&P 500 ETFs by more than 115 percentage points (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Donald Sussman of Paloma Partners
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, pet market is growing at a 7% annual rate and is expected to reach $110 billion in 2021. So, we are checking out the 5 best stocks for animal lovers. We go through lists like the 15 best Jim Cramer stocks to identify the next Tesla that will deliver outsized returns. 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 homepage. With all of this in mind we're going to go over the recent hedge fund action encompassing Pilgrim's Pride Corporation (NASDAQ:PPC).
Do Hedge Funds Think PPC Is A Good Stock To Buy Now?
At the end of the first quarter, a total of 16 of the hedge funds tracked by Insider Monkey were long this stock, a change of -6% from one quarter earlier. By comparison, 18 hedge funds held shares or bullish call options in PPC 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, Balyasny Asset Management held the most valuable stake in Pilgrim's Pride Corporation (NASDAQ:PPC), which was worth $30.6 million at the end of the fourth quarter. On the second spot was Millennium Management which amassed $21.3 million worth of shares. AQR Capital Management, Arrowstreet Capital, and Renaissance Technologies 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 BCK Capital allocated the biggest weight to Pilgrim's Pride Corporation (NASDAQ:PPC), around 1.13% of its 13F portfolio. Balyasny Asset Management is also relatively very bullish on the stock, designating 0.15 percent of its 13F equity portfolio to PPC.
Because Pilgrim's Pride Corporation (NASDAQ:PPC) has experienced falling interest from the entirety of the hedge funds we track, we can see that there lies a certain "tier" of money managers that elected to cut their entire stakes last quarter. Interestingly, Michael Gelband's ExodusPoint Capital dropped the largest stake of the 750 funds followed by Insider Monkey, comprising about $1.1 million in stock. Hoon Kim's fund, Quantinno Capital, also dumped its stock, about $0.4 million worth. These moves are interesting, as total hedge fund interest dropped by 1 funds last quarter.
Let's now review hedge fund activity in other stocks - not necessarily in the same industry as Pilgrim's Pride Corporation (NASDAQ:PPC) but similarly valued. We will take a look at Corelogic Inc (NYSE:CLGX), Regal Beloit Corporation (NYSE:RBC), Shoals Technologies Group, Inc. (NASDAQ:SHLS), Inspire Medical Systems, Inc. (NYSE:INSP), Amkor Technology, Inc. (NASDAQ:AMKR), OneConnect Financial Technology Co., Ltd. (NYSE:OCFT), and Healthequity Inc (NASDAQ:HQY). This group of stocks' market values resemble PPC's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CLGX,49,1690451,3 RBC,30,358632,5 SHLS,22,323958,22 INSP,28,431163,1 AMKR,20,172121,-4 OCFT,10,70885,5 HQY,18,221317,-2 Average,25.3,466932,4.3 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 25.3 hedge funds with bullish positions and the average amount invested in these stocks was $467 million. That figure was $122 million in PPC's case. Corelogic Inc (NYSE:CLGX) is the most popular stock in this table. On the other hand OneConnect Financial Technology Co., Ltd. (NYSE:OCFT) is the least popular one with only 10 bullish hedge fund positions. Pilgrim's Pride Corporation (NASDAQ:PPC) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for PPC is 28.8. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 28.5% in 2021 through July 23rd and surpassed the market again by 10.1 percentage points. Unfortunately PPC wasn't nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); PPC investors were disappointed as the stock returned -9.5% since the end of March (through 7/23) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2021.
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Disclosure: None. This article was originally published at Insider Monkey.