Is PLPC Stock A Buy?
In this article you are going to find out whether hedge funds think Preformed Line Products Company (NASDAQ:PLPC) is a good investment right now. We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It's not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.
Is PLPC stock a buy? Hedge funds were getting less optimistic. The number of bullish hedge fund bets were cut by 1 recently. Preformed Line Products Company (NASDAQ:PLPC) was in 4 hedge funds' portfolios at the end of the first quarter of 2021. The all time high for this statistic is 7. Our calculations also showed that PLPC isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings). There were 5 hedge funds in our database with PLPC holdings at the end of December.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 more than 115 percentage points since March 2017 (see the details here). We have been able to outperform the passive index funds by tracking the moves of corporate insiders and hedge funds, and we believe small investors can benefit a lot from reading hedge fund investor letters and 13F filings.
Chuck Royce of Royce & Associates
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, an activist hedge fund wants to buy this $27 biotech stock for $50. So, we recommended a long position to our monthly premium newsletter subscribers. We go through lists like the 10 best battery stocks 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 check out the recent hedge fund action regarding Preformed Line Products Company (NASDAQ:PLPC).
Do Hedge Funds Think PLPC Is A Good Stock To Buy Now?
At the end of March, a total of 4 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -20% from one quarter earlier. On the other hand, there were a total of 7 hedge funds with a bullish position in PLPC a year ago. With the smart money's sentiment swirling, there exists an "upper tier" of noteworthy hedge fund managers who were upping their stakes significantly (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, Chuck Royce's Royce & Associates has the most valuable position in Preformed Line Products Company (NASDAQ:PLPC), worth close to $16.3 million, corresponding to 0.1% of its total 13F portfolio. On Royce & Associates's heels is Renaissance Technologies, which holds a $5.6 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Other members of the smart money with similar optimism encompass Ali Motamed's Invenomic Capital Management, Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital and . 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 0.3% of its 13F portfolio. Royce & Associates is also relatively very bullish on the stock, earmarking 0.11 percent of its 13F equity portfolio to PLPC.
We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Millennium Management. One hedge fund selling its entire position doesn't always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don't think this is the case in this case because none of the 750+ hedge funds tracked by Insider Monkey identified PLPC as a viable investment and initiated a position in the stock.
Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as Preformed Line Products Company (NASDAQ:PLPC) but similarly valued. We will take a look at Transportadora de Gas del Sur SA (NYSE:TGS), Tilly's Inc (NYSE:TLYS), Vera Bradley, Inc. (NASDAQ:VRA), Leju Holdings Ltd (NYSE:LEJU), Immunic, Inc. (NASDAQ:IMUX), Fluidigm Corporation (NASDAQ:FLDM), and CASI Pharmaceuticals Inc (NASDAQ:CASI). This group of stocks' market values are similar to PLPC's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position TGS,7,10937,0 TLYS,15,45210,2 VRA,17,51136,2 LEJU,2,3704,0 IMUX,9,26439,0 FLDM,15,79749,-6 CASI,10,35326,2 Average,10.7,36072,0 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 10.7 hedge funds with bullish positions and the average amount invested in these stocks was $36 million. That figure was $24 million in PLPC's case. Vera Bradley, Inc. (NASDAQ:VRA) is the most popular stock in this table. On the other hand Leju Holdings Ltd (NYSE:LEJU) 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 27.8. 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 17.2% in 2021 through June 11th and still beat the market by 3.3 percentage points. A small number of hedge funds were also right about betting on PLPC as the stock returned 15.5% since the end of the first quarter (through 6/11) 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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