Do Hedge Funds Love Parsley Energy Inc (PE)?

Before we spend many hours researching a company, we’d like to analyze what hedge funds and billionaire investors think of the stock first. We would like to do so because the elite investors’ consensus returns have been exceptional. The top 30 S&P 500 stocks among hedge funds at the end of September 2014 yielded an average return of 9.5% during the last 12 months ending in October 30. Sixty three percent of these 30 stocks outperformed the market. Although the elite funds occasionally have their duds, such as Micron and Anadarko Petroleum, which fell 50% and 26%, respectively during the same time period, the hedge fund picks seem to work on average. In the following paragraphs, we find out what the billionaire investors and hedge funds think of Parsley Energy Inc (NYSE:PE).

Is Parsley Energy Inc (NYSE:PE) going to take off soon? Investors who are in the know are getting less optimistic. The number of bullish hedge fund positions fell by 4 lately. At the end of this article we will also compare PE to other stocks including TRI Pointe Group Inc (NYSE:TPH), Fulton Financial Corp (NASDAQ:FULT), and Northern Tier Energy LP (NYSE:NTI) to get a better sense of its popularity.

Now, let’s take a gander at the recent action regarding Parsley Energy Inc (NYSE:PE).

What does the smart money think about Parsley Energy Inc (NYSE:PE)?

At Q3’s end, a total of 21 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -16% from the previous quarter. With the smart money’s sentiment swirling, there exists an “upper tier” of noteworthy hedge fund managers who were upping their holdings meaningfully (or already accumulated large positions).

Of the funds tracked by Insider Monkey, Millennium Management, managed by Israel Englander, holds the number one position in Parsley Energy Inc (NYSE:PE). Millennium Management has a $92.9 million position in the stock, comprising 0.2% of its 13F portfolio. The second most bullish fund manager is Zimmer Partners, managed by Stuart J. Zimmer, which holds a $84.6 million position; 6.4% of its 13F portfolio is allocated to the stock. Remaining professional money managers that are bullish contain John Labanowski’s Brenham Capital Management, Ken Griffin’s Citadel Investment Group and Vince Maddi and Shawn Brennan’s SIR Capital Management.

Seeing as Parsley Energy Inc (NYSE:PE) has witnessed declining sentiment from hedge fund managers, it’s easy to see that there lies a certain “tier” of hedgies that elected to cut their entire stakes heading into Q4. Interestingly, Todd J. Kantor’s Encompass Capital Advisors dropped the biggest position of all the hedgies watched by Insider Monkey, totaling an estimated $23.5 million in stock, and David M. Knott’s Dorset Management was right behind this move, as the fund said goodbye to about $4.9 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest fell by 4 funds heading into Q4.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Parsley Energy Inc (NYSE:PE) but similarly valued. These stocks are TRI Pointe Group Inc (NYSE:TPH), Fulton Financial Corp (NASDAQ:FULT), Northern Tier Energy LP (NYSE:NTI), and Zynga Inc (NASDAQ:ZNGA). This group of stocks’ market values are similar to PE’s market value.

As you can see these stocks had an average of 17 hedge funds with bullish positions and the average amount invested in these stocks was $261 million. That figure was $423 million in PE’s case. Zynga Inc (NASDAQ:ZNGA) is the most popular stock in this table. On the other hand Fulton Financial Corp (NASDAQ:FULT) is the least popular one with only 11 bullish hedge fund positions. Parsley Energy Inc (NYSE:PE) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. In this regard ZNGA might be a better candidate to consider a long position.