“Market conditions are changing. The continued rise in interest rates suggests we are in the early stages of a bond bear market, which could intensify as central banks withdraw liquidity. The receding tide of liquidity will start to reveal more rocks beyond what has been exposed in emerging markets so far, and the value of a value discipline will be in avoiding the biggest capital-destroying rocks. If a rock emerges on the crowded shore of U.S. momentum, it could result in a major liquidity challenge, as momentum is often most intense on the downside as a crowded trade reverses. So investors are facing a large potential trade-off right now: continue to bet on the current dominance of momentum and the S&P 500, or bet on change and take an active value bet in names with attractive value and optionality, but with negative momentum,” said Clearbridge Investments in its market commentary. We aren’t sure whether long-term interest rates will top 5% and value stocks outperform growth, but we follow hedge fund investor letters to understand where the markets and stocks might be going. This article will lay out and discuss the hedge fund and institutional investor sentiment towards Pampa Energia S.A. (NYSE:PAM).
Is Pampa Energia S.A. (NYSE:PAM) a first-rate investment right now? Hedge funds are taking a bullish view. The number of bullish hedge fund positions increased by 3 lately. Our calculations also showed that pam isn’t among the 30 most popular stocks among hedge funds.
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the market by 18 percentage points since May 2014 through December 3, 2018 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
We’re going to check out the latest hedge fund action surrounding Pampa Energia S.A. (NYSE:PAM).
Hedge fund activity in Pampa Energia S.A. (NYSE:PAM)
Heading into the fourth quarter of 2018, a total of 15 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 25% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards PAM over the last 13 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Point State Capital, managed by Zach Schreiber, holds the biggest position in Pampa Energia S.A. (NYSE:PAM). Point State Capital has a $156.9 million position in the stock, comprising 2.1% of its 13F portfolio. Coming in second is Daniel S. Och of OZ Management, with a $59.1 million position; 0.3% of its 13F portfolio is allocated to the stock. Some other peers with similar optimism consist of Jody LaNasa’s Serengeti Asset Management, Kevin D. Eng’s Columbus Hill Capital Management and Steve Cohen’s Point72 Asset Management.
With a general bullishness amongst the heavyweights, specific money managers have been driving this bullishness. Hudson Bay Capital Management, managed by Sander Gerber, initiated the most valuable position in Pampa Energia S.A. (NYSE:PAM). Hudson Bay Capital Management had $8.4 million invested in the company at the end of the quarter. Howard Marks’s Oaktree Capital Management also made a $7.5 million investment in the stock during the quarter. The following funds were also among the new PAM investors: Guy Shahar’s DSAM Partners and Matthew Hulsizer’s PEAK6 Capital Management.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Pampa Energia S.A. (NYSE:PAM) but similarly valued. These stocks are Pan American Silver Corp. (NASDAQ:PAAS), American States Water Co (NYSE:AWR), Cott Corporation (NYSE:COT), and Cision Ltd. (NYSE:CISN). This group of stocks’ market valuations are similar to PAM’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| PAAS | 15 | 127167 | -1 |
| AWR | 12 | 56951 | 4 |
| COT | 25 | 581805 | 2 |
| CISN | 17 | 134540 | 1 |
| Average | 17.25 | 225116 | 1.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 17.25 hedge funds with bullish positions and the average amount invested in these stocks was $225 million. That figure was $306 million in PAM’s case. Cott Corporation (NYSE:COT) is the most popular stock in this table. On the other hand American States Water Co (NYSE:AWR) is the least popular one with only 12 bullish hedge fund positions. Pampa Energia S.A. (NYSE:PAM) 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 COT might be a better candidate to consider a long position.
Disclosure: None. This article was originally published at Insider Monkey.
