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Where Do Hedge Funds Stand On Preformed Line Products Company (PLPC)?

Abigail Fisher
·6 min read

While the market driven by short-term sentiment influenced by the accomodative interest rate environment in the US, virus news and stimulus talks, many smart money investors are starting to get cautious towards the current bull run since March and hedging or reducing many of their long positions. Some fund managers are betting on Dow hitting 30,000 to generate strong returns. However, as we know, big investors usually buy stocks with strong fundamentals that can deliver gains both in bull and bear markets, which is why we believe we can profit from imitating them. In this article, we are going to take a look at the smart money sentiment surrounding Preformed Line Products Company (NASDAQ:PLPC).

Is Preformed Line Products Company (NASDAQ:PLPC) worth your attention right now? The smart money was becoming less confident. The number of long hedge fund positions were trimmed by 2 recently. Preformed Line Products Company (NASDAQ:PLPC) was in 5 hedge funds' portfolios at the end of September. The all time high for this statistics is 7. Our calculations also showed that PLPC isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks). There were 7 hedge funds in our database with PLPC positions at the end of the second quarter. Video: Watch our video about the top 5 most popular hedge fund stocks.

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 S&P 500 ETFs by 66 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 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.

Chuck Royce
Chuck Royce

Chuck Royce of Royce & Associates

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks 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. Keeping this in mind let's take a look at the fresh hedge fund action encompassing Preformed Line Products Company (NASDAQ:PLPC).

What does smart money think about Preformed Line Products Company (NASDAQ:PLPC)?

At third quarter's end, a total of 5 of the hedge funds tracked by Insider Monkey were long this stock, a change of -29% from the previous quarter. On the other hand, there were a total of 6 hedge funds with a bullish position in PLPC a year ago. With hedgies' capital changing hands, there exists a few noteworthy hedge fund managers who were boosting their holdings substantially (or already accumulated large positions).

Among these funds, Royce & Associates held the most valuable stake in Preformed Line Products Company (NASDAQ:PLPC), which was worth $14.5 million at the end of the third quarter. On the second spot was Renaissance Technologies which amassed $4 million worth of shares. Millennium Management, Invenomic Capital Management, 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 Invenomic Capital Management allocated the biggest weight to Preformed Line Products Company (NASDAQ:PLPC), around 0.41% of its 13F portfolio. Royce & Associates is also relatively very bullish on the stock, dishing out 0.16 percent of its 13F equity portfolio to PLPC.

Seeing as Preformed Line Products Company (NASDAQ:PLPC) has experienced a decline in interest from the smart money, it's easy to see that there is a sect of hedge funds that decided to sell off their full holdings in the third quarter. Intriguingly, Ken Griffin's Citadel Investment Group dropped the largest stake of all the hedgies watched by Insider Monkey, valued at about $0.2 million in stock, and Gavin Saitowitz and Cisco J. del Valle's Springbok Capital was right behind this move, as the fund dumped about $0 million worth. These moves are important to note, as aggregate hedge fund interest was cut by 2 funds in the third quarter.

Let's now review hedge fund activity in other stocks similar to Preformed Line Products Company (NASDAQ:PLPC). We will take a look at Sierra Metals Inc. (NYSE:SMTS), Gold Resource Corporation (NYSE:GORO), American Renal Associates Holdings, Inc (NYSE:ARA), TELA Bio, Inc. (NASDAQ:TELA), Eiger BioPharmaceuticals, Inc. (NASDAQ:EIGR), Value Line, Inc. (NASDAQ:VALU), and Astronics Corporation (NASDAQ:ATRO). This group of stocks' market values are closest to PLPC's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position SMTS,3,1279,1 GORO,4,1738,-3 ARA,5,130082,0 TELA,7,75777,-2 EIGR,26,87225,0 VALU,2,2198,0 ATRO,21,50971,-2 Average,9.7,49896,-0.9 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 9.7 hedge funds with bullish positions and the average amount invested in these stocks was $50 million. That figure was $20 million in PLPC's case. Eiger BioPharmaceuticals, Inc. (NASDAQ:EIGR) is the most popular stock in this table. On the other hand Value Line, Inc. (NASDAQ:VALU) is the least popular one with only 2 bullish hedge fund positions. Preformed Line Products Company (NASDAQ:PLPC) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for PLPC is 30.7. 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 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 30.7% in 2020 through November 27th and still beat the market by 16.1 percentage points. A small number of hedge funds were also right about betting on PLPC as the stock returned 25.2% since the end of the third quarter (through 11/27) 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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