Hedge Funds Are Buying Pinnacle West Capital Corporation (PNW)

Pinnacle West Capital Corporation (NYSE:PNW) has seen an increase in enthusiasm from smart money in recent months.

To most investors, hedge funds are assumed to be worthless, outdated financial tools of years past. While there are more than 8000 funds in operation at present, we hone in on the aristocrats of this group, around 450 funds. It is widely believed that this group oversees the majority of the smart money’s total asset base, and by paying attention to their highest performing picks, we have determined a number of investment strategies that have historically beaten the broader indices. Our small-cap hedge fund strategy outpaced the S&P 500 index by 18 percentage points a year for a decade in our back tests, and since we’ve began to sharing our picks with our subscribers at the end of August 2012, we have outperformed the S&P 500 index by 23.3 percentage points in 8 months (see all of our picks from August).

Equally as integral, bullish insider trading activity is a second way to parse down the financial markets. There are a variety of motivations for an upper level exec to cut shares of his or her company, but only one, very obvious reason why they would initiate a purchase. Plenty of empirical studies have demonstrated the useful potential of this strategy if shareholders know where to look (learn more here).

Now, it’s important to take a peek at the latest action regarding Pinnacle West Capital Corporation (NYSE:PNW).

How are hedge funds trading Pinnacle West Capital Corporation (NYSE:PNW)?

In preparation for this quarter, a total of 15 of the hedge funds we track held long positions in this stock, a change of 15% from one quarter earlier. With hedge funds’ sentiment swirling, there exists a few notable hedge fund managers who were boosting their stakes substantially.

According to our comprehensive database, David Harding’s Winton Capital Management had the most valuable position in Pinnacle West Capital Corporation (NYSE:PNW), worth close to $36.8 million, comprising 0.7% of its total 13F portfolio. Sitting at the No. 2 spot is Adage Capital Management, managed by Phill Gross and Robert Atchinson, which held a $32.2 million position; 0.1% of its 13F portfolio is allocated to the stock. Some other peers that hold long positions include Cliff Asness’s AQR Capital Management, Jim Simons’s Renaissance Technologies and Sean Cullinan’s Point State Capital.

With a general bullishness amongst the heavyweights, specific money managers were breaking ground themselves. Renaissance Technologies, managed by Jim Simons, created the most outsized position in Pinnacle West Capital Corporation (NYSE:PNW). Renaissance Technologies had 16.7 million invested in the company at the end of the quarter. Sean Cullinan’s Point State Capital also initiated a $10.3 million position during the quarter. The following funds were also among the new PNW investors: Steven Cohen’s SAC Capital Advisors, Glenn Russell Dubin’s Highbridge Capital Management, and Paul Tudor Jones’s Tudor Investment Corp.

What have insiders been doing with Pinnacle West Capital Corporation (NYSE:PNW)?

Bullish insider trading is best served when the company in focus has experienced transactions within the past half-year. Over the last 180-day time frame, Pinnacle West Capital Corporation (NYSE:PNW) has experienced zero unique insiders buying, and 5 insider sales (see the details of insider trades here).

Let’s check out hedge fund and insider activity in other stocks similar to Pinnacle West Capital Corporation (NYSE:PNW). These stocks are Brookfield Infrastructure Partners L.P. (NYSE:BIP), CMS Energy Corporation (NYSE:CMS), Alliant Energy Corporation (NYSE:LNT), OGE Energy Corp. (NYSE:OGE), and SCANA Corporation (NYSE:SCG). All of these stocks are in the electric utilities industry and their market caps are similar to PNW’s market cap.