Were Hedge Funds Right About PTC Inc (PTC)?
Most investors tend to think that hedge funds and other asset managers are worthless, as they cannot beat even simple index fund portfolios. In fact, most people expect hedge funds to compete with and outperform the bull market that we have witnessed in recent years. However, hedge funds are generally partially hedged and aim at delivering attractive risk-adjusted returns rather than following the ups and downs of equity markets hoping that they will outperform the broader market. Our research shows that certain hedge funds do have great stock picking skills (and we can identify these hedge funds in advance pretty accurately), so let’s take a glance at the smart money sentiment towards PTC Inc (NASDAQ:PTC).
Is PTC Inc (NASDAQ:PTC) a superb investment right now? The smart money was getting more optimistic. The number of long hedge fund positions improved by 5 in recent months. PTC Inc (NASDAQ:PTC) was in 40 hedge funds' portfolios at the end of the second quarter of 2020. The all time high for this statistics is 46. Our calculations also showed that PTC 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). There were 35 hedge funds in our database with PTC positions at the end of the first quarter.
Video: Watch our video about the top 5 most popular hedge fund stocks.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 56 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 34% through August 17th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Michael Lowenstein of Kensico Capital
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. 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. With all of this in mind we're going to take a look at the key hedge fund action regarding PTC Inc (NASDAQ:PTC).
What have hedge funds been doing with PTC Inc (NASDAQ:PTC)?
Heading into the third quarter of 2020, a total of 40 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 14% from the previous quarter. The graph below displays the number of hedge funds with bullish position in PTC over the last 20 quarters. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to Insider Monkey's hedge fund database, 40 North Management, managed by David S. Winter and David J. Millstone, holds the largest position in PTC Inc (NASDAQ:PTC). 40 North Management has a $350.1 million position in the stock, comprising 10.7% of its 13F portfolio. Coming in second is Praesidium Investment Management Company, managed by Kevin Oram and Peter Uddo, which holds a $207.4 million position; the fund has 13.5% of its 13F portfolio invested in the stock. Other members of the smart money that hold long positions encompass Ian Simm's Impax Asset Management, Michael Lowenstein's Kensico Capital and Ryan Pedlow's Two Creeks Capital Management. In terms of the portfolio weights assigned to each position StackLine Partners allocated the biggest weight to PTC Inc (NASDAQ:PTC), around 13.75% of its 13F portfolio. Praesidium Investment Management Company is also relatively very bullish on the stock, dishing out 13.48 percent of its 13F equity portfolio to PTC.
As industrywide interest jumped, key money managers have been driving this bullishness. Sandbar Asset Management, managed by Michael Cowley, established the biggest position in PTC Inc (NASDAQ:PTC). Sandbar Asset Management had $5.6 million invested in the company at the end of the quarter. Michael R. Weisberg's Crestwood Capital Management also made a $5.5 million investment in the stock during the quarter. The other funds with brand new PTC positions are Steve Cohen's Point72 Asset Management, Richard SchimeláandáLawrence Sapanski's Cinctive Capital Management, and Bruce Kovner's Caxton Associates LP.
Let's check out hedge fund activity in other stocks - not necessarily in the same industry as PTC Inc (NASDAQ:PTC) but similarly valued. These stocks are Dropbox, Inc. (NASDAQ:DBX), Autohome Inc (NYSE:ATHM), Banco de Chile (NYSE:BCH), Lennox International Inc. (NYSE:LII), Centrais Eletricas Brasileiras SA (NYSE:EBR), The Western Union Company (NYSE:WU), and Camden Property Trust (NYSE:CPT). This group of stocks' market values resemble PTC's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position DBX,51,1326475,7 ATHM,24,820669,9 BCH,3,38541,-1 LII,24,258111,3 EBR,8,10334,3 WU,34,622814,0 CPT,26,336306,-6 Average,24.3,487607,2.1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 24.3 hedge funds with bullish positions and the average amount invested in these stocks was $488 million. That figure was $1256 million in PTC's case. Dropbox, Inc. (NASDAQ:DBX) is the most popular stock in this table. On the other hand Banco de Chile (NYSE:BCH) is the least popular one with only 3 bullish hedge fund positions. PTC Inc (NASDAQ:PTC) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for PTC is 74.6. 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. Hedge funds were also right about betting on PTC, though not to the same extent, as the stock returned 7.8% since Q2 (through October 30th) and outperformed the market as well.
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Disclosure: None. This article was originally published at Insider Monkey.
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