The financial regulations require hedge funds and wealthy investors that exceeded the $100 million equity holdings threshold to file a report that shows their positions at the end of every quarter. Even though it isn't the intention, these filings to a certain extent level the playing field for ordinary investors. The latest round of 13F filings disclosed the funds' positions on September 30th, about a month before the elections. We at Insider Monkey have made an extensive database of more than 817 of those established hedge funds and famous value investors' filings. In this article, we analyze how these elite funds and prominent investors traded PriceSmart, Inc. (NASDAQ:PSMT) based on those filings.
Is PSMT a good stock to buy now? PSMT shares haven't seen a lot of action during the second quarter. Overall, hedge fund sentiment was unchanged. The stock was in 12 hedge funds' portfolios at the end of September. Our calculations also showed that PSMT 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). The level and the change in hedge fund popularity aren't the only variables you need to analyze to decipher hedge funds' perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That's why at the end of this article we will examine companies such as Urban Outfitters, Inc. (NASDAQ:URBN), Cabot Corporation (NYSE:CBT), and eHealth, Inc. (NASDAQ:EHTH) to gather more data points.
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 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'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 17th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Matthew Hulsizer PEAK6 Capital
Matthew Hulsizer of PEAK6 Capital
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 we're going to review the key hedge fund action surrounding PriceSmart, Inc. (NASDAQ:PSMT).
Do Hedge Funds Think PSMT Is A Good Stock To Buy Now?
At third quarter's end, a total of 12 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards PSMT over the last 21 quarters. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Is PSMT A Good Stock To Buy?
Among these funds, Renaissance Technologies held the most valuable stake in PriceSmart, Inc. (NASDAQ:PSMT), which was worth $23.9 million at the end of the third quarter. On the second spot was Arrowstreet Capital which amassed $8.5 million worth of shares. Winton Capital Management, PEAK6 Capital Management, and PEAK6 Capital Management 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 Weld Capital Management allocated the biggest weight to PriceSmart, Inc. (NASDAQ:PSMT), around 0.13% of its 13F portfolio. Winton Capital Management is also relatively very bullish on the stock, dishing out 0.12 percent of its 13F equity portfolio to PSMT.
Since PriceSmart, Inc. (NASDAQ:PSMT) has experienced a decline in interest from the smart money, it's safe to say that there exists a select few hedge funds who were dropping their entire stakes heading into Q4. It's worth mentioning that Paul Marshall and Ian Wace's Marshall Wace LLP dropped the largest stake of the "upper crust" of funds followed by Insider Monkey, valued at close to $0.5 million in stock. Brandon Haley's fund, Holocene Advisors, also dropped its stock, about $0.4 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).
Let's check out hedge fund activity in other stocks similar to PriceSmart, Inc. (NASDAQ:PSMT). These stocks are Urban Outfitters, Inc. (NASDAQ:URBN), Cabot Corporation (NYSE:CBT), eHealth, Inc. (NASDAQ:EHTH), Grupo Financiero Galicia S.A. (NASDAQ:GGAL), Intra-Cellular Therapies Inc (NASDAQ:ITCI), Sunoco LP (NYSE:SUN), and BankUnited Inc (NYSE:BKU). This group of stocks' market valuations match PSMT's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position URBN,22,142960,2 CBT,22,71210,4 EHTH,35,372411,5 GGAL,8,17959,-3 ITCI,26,315998,13 SUN,6,14951,2 BKU,14,103775,-2 Average,19,148466,3 [/table]
As you can see these stocks had an average of 19 hedge funds with bullish positions and the average amount invested in these stocks was $148 million. That figure was $43 million in PSMT's case. eHealth, Inc. (NASDAQ:EHTH) is the most popular stock in this table. On the other hand Sunoco LP (NYSE:SUN) is the least popular one with only 6 bullish hedge fund positions. PriceSmart, Inc. (NASDAQ:PSMT) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for PSMT is 35.3. 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 32.9% in 2020 through December 8th and still beat the market by 16.2 percentage points. A small number of hedge funds were also right about betting on PSMT as the stock returned 28.8% since the end of the third quarter (through 12/8) and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.
