With the fourth-quarter round of 13F filings behind us it is time to take a look at the stocks in which some of the best money managers in the world preferred to invest or sell heading into the first quarter of 2021. One of these stocks was Pool Corporation (NASDAQ:POOL).
Is POOL stock a buy? Pool Corporation (NASDAQ:POOL) shareholders have witnessed a decrease in hedge fund interest lately. Pool Corporation (NASDAQ:POOL) was in 33 hedge funds' portfolios at the end of December. The all time high for this statistic is 36. Our calculations also showed that POOL isn't among the 30 most popular stocks among hedge funds (click for Q4 rankings).
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey's monthly stock picks returned 197% since March 2017 and outperformed the S&P 500 ETFs by more than 124 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Richard Chilton of Chilton Investment Company
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, we heard that billionaire Peter Thiel is backing this psychedelic-drug startup. So, we are taking a closer look at this space. We go through lists like the 10 best biotech stocks under $10 to identify the next stock with 10x upside potential. 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 let's go over the new hedge fund action encompassing Pool Corporation (NASDAQ:POOL).
Do Hedge Funds Think POOL Is A Good Stock To Buy Now?
Heading into the first quarter of 2021, a total of 33 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -8% from one quarter earlier. On the other hand, there were a total of 28 hedge funds with a bullish position in POOL a year ago. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Select Equity Group, managed by Robert Joseph Caruso, holds the most valuable position in Pool Corporation (NASDAQ:POOL). Select Equity Group has a $330.5 million position in the stock, comprising 1.4% of its 13F portfolio. The second most bullish fund manager is Ken Fisher of Fisher Asset Management, with a $104.1 million position; the fund has 0.1% of its 13F portfolio invested in the stock. Other professional money managers with similar optimism encompass Ian Simm's Impax Asset Management, Greg Poole's Echo Street Capital Management and Richard Chilton's Chilton Investment Company. In terms of the portfolio weights assigned to each position Chilton Investment Company allocated the biggest weight to Pool Corporation (NASDAQ:POOL), around 1.8% of its 13F portfolio. Aubrey Capital Management is also relatively very bullish on the stock, earmarking 1.53 percent of its 13F equity portfolio to POOL.
Since Pool Corporation (NASDAQ:POOL) has experienced falling interest from the entirety of the hedge funds we track, it's safe to say that there was a specific group of fund managers that slashed their full holdings by the end of the fourth quarter. It's worth mentioning that Renaissance Technologies sold off the largest stake of the 750 funds monitored by Insider Monkey, totaling an estimated $68.6 million in stock, and Ben Levine, Andrew Manuel and Stefan Renold's LMR Partners was right behind this move, as the fund dumped about $9.2 million worth. These moves are important to note, as total hedge fund interest was cut by 3 funds by the end of the fourth quarter.
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Pool Corporation (NASDAQ:POOL) but similarly valued. We will take a look at Telefonica Brasil SA (NYSE:VIV), FMC Corporation (NYSE:FMC), Fair Isaac Corporation (NYSE:FICO), Duke Realty Corporation (NYSE:DRE), NetApp Inc. (NASDAQ:NTAP), Masimo Corporation (NASDAQ:MASI), and Oak Street Health, Inc. (NYSE:OSH). This group of stocks' market valuations are closest to POOL's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position VIV,8,99404,-5 FMC,45,571684,4 FICO,38,1404904,-5 DRE,17,203716,-5 NTAP,34,582659,3 MASI,29,271991,2 OSH,34,656774,12 Average,29.3,541590,0.9 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 29.3 hedge funds with bullish positions and the average amount invested in these stocks was $542 million. That figure was $871 million in POOL's case. FMC Corporation (NYSE:FMC) is the most popular stock in this table. On the other hand Telefonica Brasil SA (NYSE:VIV) is the least popular one with only 8 bullish hedge fund positions. Pool Corporation (NASDAQ:POOL) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for POOL is 63.3. 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. This is a slightly positive signal but we'd rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks gained 7.9% in 2021 through April 1st and beat the market again by 0.4 percentage points. Unfortunately POOL wasn't nearly as popular as these 30 stocks and hedge funds that were betting on POOL were disappointed as the stock returned -5.5% since the end of December (through 4/1) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 30 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.
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Disclosure: None. This article was originally published at Insider Monkey.