Do Hedge Funds Love Quanta Services Inc (PWR)?

Hedge funds run by legendary names like Nelson Peltz and David Tepper make billions of dollars a year for themselves and their super-rich accredited investors (you’ve got to have a minimum of $1 million liquid to invest in a hedge fund) by spending enormous resources on analyzing and uncovering data about small-cap stocks that the big brokerage houses don’t follow. Small caps are where they can generate significant out-performance. That’s why we pay special attention to hedge fund activity in these stocks.

Is Quanta Services Inc (NYSE:PWR) an outstanding investment now? Investors who are in the know are taking a bearish view. The number of long hedge fund positions decreased by 8 in recent months. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Acadia Healthcare Company Inc (NASDAQ:ACHC), Carter’s, Inc. (NYSE:CRI), and Liberty Property Trust (NYSE:LPT) to gather more data points.

Now, let’s take a peek at the recent action surrounding Quanta Services Inc (NYSE:PWR).

What have hedge funds been doing with Quanta Services Inc (NYSE:PWR)?

At the end of the third quarter, a total of 30 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -21% from the second quarter. With the smart money’s sentiment swirling, there exists an “upper tier” of key hedge fund managers who were increasing their stakes significantly (or already accumulated large positions).

According to Insider Monkey’s hedge fund database, Ken Griffin’s Citadel Investment Group has the largest position in Quanta Services Inc (NYSE:PWR), worth close to $134.7 million, comprising 0.1% of its total 13F portfolio. The second most bullish fund manager is Ross Margolies of Stelliam Investment Management, with a $84.4 million position; the fund has 2.1% of its 13F portfolio invested in the stock. Other members of the smart money that are bullish encompass William Harnisch’s Peconic Partners LLC, Martin D. Sass’s MD Sass and Bernard Lambilliotte’s Ecofin Ltd.

Judging by the fact that Quanta Services Inc (NYSE:PWR) has faced declining sentiment from the smart money, it’s easy to see that there is a sect of money managers that slashed their positions entirely heading into Q4. At the top of the heap, Steve Cohen’s Point72 Asset Management dropped the largest position of all the hedgies followed by Insider Monkey, valued at an estimated $93.4 million in stock. Richard S. Meisenberg’s fund, ACK Asset Management, also dropped its stock, about $20.2 million worth. These moves are interesting, as total hedge fund interest was cut by 8 funds heading into Q4.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Quanta Services Inc (NYSE:PWR) but similarly valued. We will take a look at Acadia Healthcare Company Inc (NASDAQ:ACHC), Carter’s, Inc. (NYSE:CRI), Liberty Property Trust (NYSE:LPT), and Allison Transmission Holdings Inc (NYSE:ALSN). All of these stocks’ market caps are similar to PWR’s market cap.

As you can see these stocks had an average of 32.25 hedge funds with bullish positions and the average amount invested in these stocks was $754 million. That figure was $489 million in PWR’s case. Carter’s, Inc. (NYSE:CRI) is the most popular stock in this table. On the other hand Liberty Property Trust (NYSE:LPT) is the least popular one with only 19 bullish hedge fund positions. Quanta Services Inc (NYSE:PWR) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard CRI might be a better candidate to consider a long position.