At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (see why hell is coming). 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 Piper Sandler Companies (NYSE:PIPR) at the end of the first quarter and determine whether the smart money was really smart about this stock.
Piper Sandler Companies (NYSE:PIPR) has seen an increase in hedge fund sentiment in recent months. Our calculations also showed that PIPR isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks). 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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 58 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 36% through May 18th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
[caption id="attachment_26794" align="aligncenter" width="359"] Paul Tudor Jones of Tudor Investment Corp[/caption]
At Insider Monkey we scour multiple sources to uncover the next great investment idea. There is a lot of volatility in the markets and this presents amazing investment opportunities from time to time. For example, this trader claims to deliver juiced up returns with one trade a week, so we are checking out his highest conviction idea. A second trader claims to score lucrative profits by utilizing a "weekend trading strategy", so we look into his strategy's picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We recently recommended several stocks partly inspired by legendary Bill Miller's investor letter. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind let's take a gander at the key hedge fund action surrounding Piper Sandler Companies (NYSE:PIPR).
Hedge fund activity in Piper Sandler Companies (NYSE:PIPR)
Heading into the second quarter of 2020, a total of 12 of the hedge funds tracked by Insider Monkey were long this stock, a change of 9% from the fourth quarter of 2019. By comparison, 8 hedge funds held shares or bullish call options in PIPR 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.
The largest stake in Piper Sandler Companies (NYSE:PIPR) was held by Renaissance Technologies, which reported holding $17.4 million worth of stock at the end of September. It was followed by Fisher Asset Management with a $3.9 million position. Other investors bullish on the company included Arrowstreet Capital, Citadel Investment Group, and Interval Partners. In terms of the portfolio weights assigned to each position Interval Partners allocated the biggest weight to Piper Sandler Companies (NYSE:PIPR), around 0.1% of its 13F portfolio. Tudor Investment Corp is also relatively very bullish on the stock, designating 0.02 percent of its 13F equity portfolio to PIPR.
As industrywide interest jumped, some big names have jumped into Piper Sandler Companies (NYSE:PIPR) headfirst. Millennium Management, managed by Israel Englander, created the biggest position in Piper Sandler Companies (NYSE:PIPR). Millennium Management had $1.1 million invested in the company at the end of the quarter. Cliff Asness's AQR Capital Management also made a $0.6 million investment in the stock during the quarter. The other funds with new positions in the stock are Dmitry Balyasny's Balyasny Asset Management and Paul Tudor Jones's Tudor Investment Corp.
Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as Piper Sandler Companies (NYSE:PIPR) but similarly valued. These stocks are Varex Imaging Corporation (NASDAQ:VREX), Construction Partners, Inc. (NASDAQ:ROAD), Cactus, Inc. (NYSE:WHD), and Office Depot Inc (NASDAQ:ODP). All of these stocks' market caps resemble PIPR's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position VREX,19,67850,0 ROAD,6,21553,-4 WHD,18,99361,1 ODP,17,70351,1 Average,15,64779,-0.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 15 hedge funds with bullish positions and the average amount invested in these stocks was $65 million. That figure was $30 million in PIPR's case. Varex Imaging Corporation (NASDAQ:VREX) is the most popular stock in this table. On the other hand Construction Partners, Inc. (NASDAQ:ROAD) is the least popular one with only 6 bullish hedge fund positions. Piper Sandler Companies (NYSE:PIPR) is not the least popular stock in this group but hedge fund interest is still below average. 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 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 12.3% in 2020 through June 30th and surpassed the market by 15.5 percentage points. Unfortunately PIPR wasn't nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); PIPR investors were disappointed as the stock returned 17.4% during the second quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
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Disclosure: None. This article was originally published at Insider Monkey.