Are hedge funds right about this action?


Insider Monkey has processed numerous 13F deposits from successful hedge funds and value investors to create a comprehensive database of hedge fund holdings. The 13F documents show the positions of hedge funds and performing investors at the end of the second quarter. You can find articles about individual hedge fund transactions on many financial news websites. However, in this article, we’ll take a look at their collective moves over the past 6 years and analyze what Performant Financial Corp’s (NASDAQ: PFMT) smart money thinks based on that data.

East Performing financial corporation (NASDAQ: PFMT) a purchase here? The best stock pickers bet on stock. The number of long positions in hedge funds has increased by 3 in recent months. Performant Financial Corp (NASDAQ: PFMT) was listed in 10 hedge fund portfolios at the end of June. The historic high for this statistic is 11. Our calculations also showed that PFMT is not in the top 30 most popular stocks among hedge funds (click for Q2 rank).

Why are we paying the least attention to hedge fund sentiment? Our research has shown that a select group of hedge funds have outperformed S&P 500 ETFs by 79 percentage points since March 2017 (see details here). This is why we believe that hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Carlo Cannell

J. Carlo Cannell of Cannell Capital

At Insider Monkey, we scour multiple sources to uncover the next big investing idea. We go through lists like the top 10 electric vehicle stocks to pick the next Tesla that will deliver 10x yield. Even though we only recommend positions in a tiny fraction of the companies we analyze, we check as many stocks as possible. We read letters from hedge fund investors and listen to equity pitches at hedge fund conferences. You can sign up for our free daily newsletter on our homepage. With all of that in mind, let’s take a look at the new stock from the hedge funds encompassing Performant Financial Corp (NASDAQ: PFMT).

Do hedge funds think PFMT is a good stock to buy now?

At the end of the second quarter, a total of 10 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 43% from the first quarter of 2020. The graph below shows the number of hedge funds having a bullish position on PFMT over the last 24 quarters. So let’s see which hedge funds were among the top stock holders and which hedge funds were making big moves.

The largest stake in Performant Financial Corp (NASDAQ: PFMT) was held by Prescott Group Capital Management, which said it held $ 47 million in shares at the end of June. It was followed by Mill Road Capital Management with a position of $ 12.2 million. Other bullish investors for the company included Cannell Capital, Renaissance Technologies and Tudor Investment Corp. In terms of the portfolio weight assigned to each position, Prescott Group Capital Management assigned the greatest weight to Performant Financial Corp (NASDAQ: PFMT), approximately 13.3% of its 13F portfolio. Mill Road Capital Management is also relatively very bullish on the stock, distributing 4.12% of its 13F equity portfolio to PFMT.

As one might reasonably expect, there were a few big names leading the herd of bulls. Cannell Capital, managed by J. Carlo Cannell, created the largest position in Performant Financial Corp (NASDAQ: PFMT). Cannell Capital had invested $ 11.8 million in the company at the end of the quarter. Paul Tudor Jones’ Tudor Investment Corp also invested $ 4 million in the stock during the quarter. The only other fund with a new position in the stock is Gavin Saitowitz and Prelude Capital of Cisco J. del Valle (formerly Springbok Capital).

Now let’s review hedge fund activity in other stocks similar to Performant Financial Corp (NASDAQ: PFMT). We’ll be looking at Team, Inc. (NYSE: TISI), Trecora Resources (NYSE: TREC), First Western Financial, Inc. (NASDAQ: MYFW), Chemung Financial Corp. (NASDAQ: CHMG), County Bancorp, Inc (NASDAQ: ICBK), Repro Med Systems, Inc. (NASDAQ: KRMD) and Delta Apparel, Inc. (NYSE: DLA). The market valuations of this group of shares are similar to the market valuation of PFMT.

[table] Ticker, number of HF with positions, total value of HF positions (x1000), change of HF position TISI, 13 51553.2 TREC, 7.31318.1 MYFW, 5.15564.2 CHMG, 5.12517.2 ICBK, 6.9465.3 KRMD, 10.13505, -1 DLA, 7.14289.1 Medium, 7.6.21173.1.4 [/table]

Check the table here if you have formatting issues.

As you can see, these stocks had an average of 7.6 hedge funds with bullish positions and the average amount invested in these stocks was $ 21 million. This figure was $ 85 million in the case of PFMT. Team, Inc. (NYSE: TISI) is the most popular stock in this table. On the other hand, First Western Financial, Inc. (NASDAQ: MYFW) is the least popular with only 5 bullish hedge fund positions. Performant Financial Corp (NASDAQ: PFMT) is not the most popular stock in this group, but hedge fund interest is still above average. Our overall hedge fund sentiment score for PFMT is 66.5. Stocks with a 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 the 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 25.7% in 2021 through September 27 and have consistently beaten the market by 6.2 percentage points. Hedge funds were also right to bet on PFMT as the stock has returned 13.6% since the end of the second quarter (through 9/27) and has outperformed the market. Hedge funds have been rewarded for their relative optimism.

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Disclosure: none. This article originally appeared on Insider Monkey.

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