“Market volatility has picked up again over the past few weeks. Headlines highlight risks regarding interest rates, the Fed, China, house prices, auto sales, trade wars, and more. Uncertainty abounds. But doesn’t it always? I have no view on whether the recent volatility will continue for a while, or whether the market will be back at all-time highs before we know it. I remain focused on preserving and growing our capital, and continue to believe that the best way to do so is via a value-driven, concentrated, patient approach. I shun consensus holdings, rich valuations, and market fads, in favor of solid, yet frequently off-the-beaten-path, businesses run by excellent, aligned management teams, purchased at deep discounts to intrinsic value,” are the words of Maran Capital’s Dan Roller. His stock picks have been beating the S&P 500 Index handily. 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 PacWest Bancorp (NASDAQ:PACW) and see how it was affected.
Hedge fund activity in PacWest Bancorp (NASDAQ:PACW) was flat during Q2, though there was a lot of movement in and out of the stock. Several funds tracked by Insider Monkey sold off their positions, while George Soros’ family office Soros Fund Management (97,100 shares) was among the money managers to open new PacWest positions. Signiton LP, which just opened a position in Q2, subsequently sold it off in Q3. PacWest CEO and President Matthew P. Wagner was one of two PacWest insiders to buy shares last week, after they lost close to 15% in October. That ranked the company 7th on our list of The 25 Biggest Insider Purchases in October.
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 flagship best performing hedge funds strategy returned 17.4% year to date and outperformed the market by more than 14 percentage points this year. This strategy also outperformed the market by 3 percentage points in the fourth quarter despite the market volatility (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
George Soros of Soros Fund Management
We’re going to take a glance at the key hedge fund action regarding PacWest Bancorp (NASDAQ:PACW).
How are hedge funds trading PacWest Bancorp (NASDAQ:PACW)?
Heading into the fourth quarter of 2018, a total of 23 of the hedge funds tracked by Insider Monkey held long positions in this stock, unchanged from the second quarter of 2018 and up slightly from 18 hedge funds with a bullish position in PACW at the beginning of this year. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Cardinal Capital was the largest shareholder of PacWest Bancorp (NASDAQ:PACW), with a stake worth $82.7 million reported as of the end of June. Trailing Cardinal Capital was Ken Fisher’s Fisher Asset Management, which had amassed a stake valued at $59.6 million. Forest Hill Capital, AlphaOne Capital Partners, and Basswood Capital were also very fond of the stock, giving it large weighting in their 13F portfolios.
It’s worth mentioning that Paul Magidson, Jonathan Cohen and Ostrom Enders’ Castine Capital Management dropped the biggest position of all the hedgies watched by Insider Monkey, totaling close to $7.1 million in stock, and Glenn Russell Dubin’s Highbridge Capital Management was right behind this move, as the fund cut about $6.6 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s now review hedge fund activity in other stocks similar to PacWest Bancorp (NASDAQ:PACW). These stocks are Eaton Vance Corp (NYSE:EV), Pivotal Software, Inc. (NYSE:PVTL), Phillips 66 Partners LP (NYSE:PSXP), and BWX Technologies Inc (NYSE:BWXT). This group of stocks’ market caps are similar to PACW’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| EV | 15 | 206973 | 2 |
| PVTL | 21 | 258688 | 21 |
| PSXP | 2 | 7861 | -3 |
| BWXT | 23 | 274958 | 3 |
As you can see these stocks had an average of 15 hedge funds with bullish positions and the average amount invested in these stocks was $187 million. That figure was $321 million in PACW’s case. BWX Technologies Inc (NYSE:BWXT) is the most popular stock in this table. On the other hand Phillips 66 Partners LP (NYSE:PSXP) is the least popular one with only 2 bullish hedge fund positions. PacWest Bancorp (NASDAQ:PACW) is not the most popular stock in this group but hedge fund interest is still above average, and there is more money invested in it than any of the other stocks. Given that insiders are also bullish on the price of PacWest shares, it may be worth considering for a place in your own portfolio.
Disclosure: None. This article was originally published at Insider Monkey.
