“October lived up to its scary reputation—the S&P 500 falling in the month by the largest amount in the last 40 years, the only worse Octobers being ’08 and the Crash of ’87. For perspective, there have been only 5 occasions in those 40 years when the S&P 500 declined by greater than 20% from peak to trough. Other than the ’87 Crash, all were during recessions. There were 17 other instances, over the same time frame, when the market fell by over 10% but less than 20%. Furthermore, this is the 18th correction of 5% or more since the current bull market started in March ’09. Corrections are the norm. They can be healthy as they often undo market complacency—overbought levels—potentially allowing the market to base and move even higher.” This is how Trapeze Asset Management summarized the recent market moves in its investor letter. We pay attention to what hedge funds are doing in a particular stock before considering a potential investment because it works for us. So let’s take a glance at the smart money sentiment towards one of the stocks hedge funds invest in.
Is PNM Resources, Inc. (NYSE:PNM) a safe investment now? The smart money is in a bullish mood. The number of bullish hedge fund positions advanced by 6 lately. Our calculations also showed that pnm isn’t among the 30 most popular stocks among hedge funds.
If you’d ask most traders, hedge funds are perceived as worthless, old investment vehicles of years past. While there are more than 8,000 funds with their doors open at the moment, Our researchers look at the elite of this group, approximately 700 funds. These investment experts have their hands on the lion’s share of the hedge fund industry’s total asset base, and by tracking their first-class equity investments, Insider Monkey has unearthed various investment strategies that have historically exceeded the S&P 500 index. Insider Monkey’s flagship hedge fund strategy surpassed the S&P 500 index by 6 percentage points a year since its inception in May 2014 through early November 2018. We were able to generate large returns even by identifying short candidates. Our portfolio of short stocks lost 24% since February 2017 (through December 3rd) even though the market was up nearly 23% during the same period. We just shared a list of 11 short targets in our latest quarterly update.
We’re going to take a look at the fresh hedge fund action surrounding PNM Resources, Inc. (NYSE:PNM).
Hedge fund activity in PNM Resources, Inc. (NYSE:PNM)
Heading into the fourth quarter of 2018, a total of 19 of the hedge funds tracked by Insider Monkey were long this stock, a change of 46% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards PNM over the last 13 quarters. With hedgies’ positions undergoing their usual ebb and flow, there exists an “upper tier” of notable hedge fund managers who were increasing their holdings significantly (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, Jim Simons’s Renaissance Technologies has the largest position in PNM Resources, Inc. (NYSE:PNM), worth close to $98.2 million, comprising 0.1% of its total 13F portfolio. Coming in second is GAMCO Investors, managed by Mario Gabelli, which holds a $84.8 million position; 0.6% of its 13F portfolio is allocated to the company. Some other peers that hold long positions encompass Cliff Asness’s AQR Capital Management, Ken Griffin’s Citadel Investment Group and Israel Englander’s Millennium Management.
As industrywide interest jumped, some big names have been driving this bullishness. GLG Partners, managed by Noam Gottesman, assembled the biggest position in PNM Resources, Inc. (NYSE:PNM). GLG Partners had $4.1 million invested in the company at the end of the quarter. Brandon Haley’s Holocene Advisors also initiated a $1 million position during the quarter. The other funds with new positions in the stock are Paul Tudor Jones’s Tudor Investment Corp, Ken Griffin’s Citadel Investment Group, and Dmitry Balyasny’s Balyasny Asset Management.
Let’s also examine hedge fund activity in other stocks similar to PNM Resources, Inc. (NYSE:PNM). We will take a look at CVB Financial Corp. (NASDAQ:CVBF), Community Bank System, Inc. (NYSE:CBU), Moog Inc (NYSE:MOG), and Acadia Healthcare Company Inc (NASDAQ:ACHC). This group of stocks’ market valuations are closest to PNM’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CVBF | 11 | 46106 | 5 |
| CBU | 9 | 23697 | 1 |
| MOG | 13 | 66365 | -5 |
| ACHC | 19 | 290488 | 2 |
| Average | 13 | 106664 | 0.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 13 hedge funds with bullish positions and the average amount invested in these stocks was $107 million. That figure was $265 million in PNM’s case. Acadia Healthcare Company Inc (NASDAQ:ACHC) is the most popular stock in this table. On the other hand Community Bank System, Inc. (NYSE:CBU) is the least popular one with only 9 bullish hedge fund positions. PNM Resources, Inc. (NYSE:PNM) 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 ACHC might be a better candidate to consider a long position.
Disclosure: None. This article was originally published at Insider Monkey.
