Performant Financial Corp (PFMT): Are Hedge Funds Right About This Stock?

This article was originally published on this site

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

Is Performant Financial Corp (NASDAQ:PFMT) a buy here? The best stock pickers were betting on the stock. The number of long hedge fund positions went up by 3 in recent months. Performant Financial Corp (NASDAQ:PFMT) was in 10 hedge funds’ portfolios at the end of June. The all time high for this statistic is 11. Our calculations also showed that PFMT isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 79 percentage points since March 2017 (see the details here). That’s why we believe 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 great investment idea. We go through lists like the 10 best EV 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. With all of this in mind let’s check out the fresh hedge fund action encompassing Performant Financial Corp (NASDAQ:PFMT).

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

At Q2’s end, 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 displays the number of hedge funds with bullish position in PFMT over the last 24 quarters. So, let’s review which hedge funds were among the top holders of the stock 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 reported holding $47 million worth of stock at the end of June. It was followed by Mill Road Capital Management with a $12.2 million position. Other investors bullish on the company included Cannell Capital, Renaissance Technologies, and Tudor Investment Corp. In terms of the portfolio weights assigned to each position Prescott Group Capital Management allocated the biggest weight to Performant Financial Corp (NASDAQ:PFMT), around 13.3% of its 13F portfolio. Mill Road Capital Management is also relatively very bullish on the stock, dishing out 4.12 percent of its 13F equity portfolio to PFMT.

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

Let’s now review hedge fund activity in other stocks similar to Performant Financial Corp (NASDAQ:PFMT). We will take a look 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). This group of stocks’ market valuations are similar to PFMT’s market valuation.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in 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 Average,7.6,21173,1.4 [/table]

View table here if you experience 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. That figure was $85 million in PFMT’s case. 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 one 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 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 25.7% in 2021 through September 27th and still beat the market by 6.2 percentage points. Hedge funds were also right about betting on PFMT as the stock returned 13.6% since the end of Q2 (through 9/27) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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Disclosure: None. This article was originally published at Insider Monkey.