Here is What Hedge Funds Think About Primerica, Inc. (PRI)

·6 min read

Before we spend countless hours researching a company, we like to analyze what insiders, hedge funds and billionaire investors think of the stock first. This is a necessary first step in our investment process because our research has shown that the elite investors' consensus returns have been exceptional. In the following paragraphs, we find out what the billionaire investors and hedge funds think of Primerica, Inc. (NYSE:PRI).

Hedge fund interest in Primerica, Inc. (NYSE:PRI) shares was flat at the end of last quarter. This is usually a negative indicator. Our calculations also showed that PRI isn't among the 30 most popular stocks among hedge funds (click for Q2 rankings). 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 BOK Financial Corporation (NASDAQ:BOKF), Hayward Holdings, Inc. (NYSE:HAYW), and Eagle Materials, Inc. (NYSE:EXP) to gather more data points.

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 79 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.

Michael Gelband of ExodusPoint Capital

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, plant based food market is expected to explode 100-fold by 2050, so we are checking out this under-the-radar stock. We go through lists like the 10 best growth stocks to buy to pick the next Tesla that will deliver a 10x return. 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 homepage. Now we're going to take a gander at the new hedge fund action encompassing Primerica, Inc. (NYSE:PRI).

Do Hedge Funds Think PRI Is A Good Stock To Buy Now?

Heading into the third quarter of 2021, a total of 20 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from one quarter earlier. On the other hand, there were a total of 25 hedge funds with a bullish position in PRI a year ago. With the smart money's capital changing hands, there exists a select group of noteworthy hedge fund managers who were increasing their holdings significantly (or already accumulated large positions).

Is PRI A Good Stock To Buy?
Is PRI A Good Stock To Buy?

The largest stake in Primerica, Inc. (NYSE:PRI) was held by Brave Warrior Capital, which reported holding $286.8 million worth of stock at the end of June. It was followed by Cantillon Capital Management with a $152.8 million position. Other investors bullish on the company included Arrowstreet Capital, Prospector Partners, and Citadel Investment Group. In terms of the portfolio weights assigned to each position Brave Warrior Capital allocated the biggest weight to Primerica, Inc. (NYSE:PRI), around 9.85% of its 13F portfolio. Prospector Partners is also relatively very bullish on the stock, dishing out 1.28 percent of its 13F equity portfolio to PRI.

Since Primerica, Inc. (NYSE:PRI) has faced a decline in interest from hedge fund managers, it's safe to say that there lies a certain "tier" of hedgies that decided to sell off their full holdings last quarter. Interestingly, John Overdeck and David Siegel's Two Sigma Advisors sold off the biggest position of the "upper crust" of funds followed by Insider Monkey, totaling close to $0.7 million in stock. Karim Abbadi and Edward McBride's fund, Centiva Capital, also dumped its stock, about $0.3 million worth. These transactions are important to note, as total hedge fund interest stayed the same (this is a bearish signal in our experience).

Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Primerica, Inc. (NYSE:PRI) but similarly valued. We will take a look at BOK Financial Corporation (NASDAQ:BOKF), Hayward Holdings, Inc. (NYSE:HAYW), Eagle Materials, Inc. (NYSE:EXP), CACI International Inc (NYSE:CACI), Pan American Silver Corp. (NASDAQ:PAAS), Rexnord Corp (NYSE:RXN), and National Oilwell Varco, Inc. (NYSE:NOV). All of these stocks' market caps match PRI's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position BOKF,13,438145,-4 HAYW,19,225060,-6 EXP,36,243658,1 CACI,26,491404,5 PAAS,24,312456,-3 RXN,29,521863,4 NOV,30,993193,1 Average,25.3,460826,-0.3 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 25.3 hedge funds with bullish positions and the average amount invested in these stocks was $461 million. That figure was $486 million in PRI's case. Eagle Materials, Inc. (NYSE:EXP) is the most popular stock in this table. On the other hand BOK Financial Corporation (NASDAQ:BOKF) is the least popular one with only 13 bullish hedge fund positions. Primerica, Inc. (NYSE:PRI) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for PRI is 37.4. 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 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 24% in 2021 through October 22nd and still beat the market by 1.6 percentage points. A small number of hedge funds were also right about betting on PRI as the stock returned 11.4% since the end of the second quarter (through 10/22) 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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