Hedge funds and large money managers usually invest with a focus on the long-term horizon and, therefore, short-lived dips on the charts, usually don’t make them change their opinion towards a company. The second half of 2015 and the first few months of this year was a stressful period for hedge funds. However, things have been taking a turn for the better in the second half of this year. Small-cap stocks which hedge funds are usually overweight outperformed the market by double digits and it may be a good time to pay attention to hedge funds’ picks before it is too late. In this article we are going to analyze the hedge fund sentiment towards Pinnacle West Capital Corporation (NYSE:PNW) to find out whether it was one of their high conviction long-term ideas.
Is Pinnacle West Capital Corporation (NYSE:PNW) worth your attention right now? Prominent investors are in an optimistic mood. The number of long hedge fund bets that are revealed through the 13F filings strengthened by 1 recently. There were 19 hedge funds in our database with PNW holdings at the end of the previous quarter. 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 Tesoro Corporation (NYSE:TSO), Expeditors International of Washington (NASDAQ:EXPD), and Albemarle Corporation (NYSE:ALB) to gather more data points.
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Hedge fund activity in Pinnacle West Capital Corporation (NYSE:PNW)
Heading into the fourth quarter of 2016, a total of 20 of the hedge funds tracked by Insider Monkey held long positions in this stock, a rise of 5% from the second quarter of 2016. Below, you can check out the change in hedge fund sentiment towards PNW over the last 5 quarters. So, let’s see 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, Israel Englander’s Millennium Management has the largest position in Pinnacle West Capital Corporation (NYSE:PNW), worth close to $263.5 million. The second most bullish fund manager is AQR Capital Management, led by Cliff Asness, holding a $260.3 million position. Some other peers with similar optimism comprise Dmitry Balyasny’s Balyasny Asset Management, Clint Carlson’s Carlson Capital and Jim Simons’ Renaissance Technologies. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.
As industrywide interest jumped, key money managers have been driving this bullishness. Zimmer Partners, led by Stuart J. Zimmer, created the most valuable position in Pinnacle West Capital Corporation (NYSE:PNW). Zimmer Partners had $5.7 million invested in the company at the end of the quarter. Matthew Hulsizer’s PEAK6 Capital Management also initiated a $1 million position during the quarter. The following funds were also among the new PNW investors: George Hall’s Clinton Group, David Costen Haley’s HBK Investments, and Ken Griffin’s Citadel Investment Group.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Pinnacle West Capital Corporation (NYSE:PNW) but similarly valued. These stocks are Tesoro Corporation (NYSE:TSO), Expeditors International of Washington (NASDAQ:EXPD), Albemarle Corporation (NYSE:ALB), and Fortune Brands Home & Security Inc (NYSE:FBHS). This group of stocks’ market valuations are closest to PNW’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| TSO | 41 | 1671737 | 3 |
| EXPD | 21 | 582053 | 1 |
| ALB | 38 | 882632 | -2 |
| FBHS | 25 | 332101 | 1 |
As you can see these stocks had an average of 31 hedge funds with bullish positions and the average amount invested in these stocks was $867 million. That figure was $669 million in PNW’s case. Tesoro Corporation (NYSE:TSO) is the most popular stock in this table. On the other hand Expeditors International of Washington (NASDAQ:EXPD) is the least popular one with only 21 bullish hedge fund positions. Compared to these stocks Pinnacle West Capital Corporation (NYSE:PNW) is even less popular than EXPD. Considering that hedge funds aren’t fond of this stock in relation to other companies analyzed in this article, it may be a good idea to analyze it in detail and understand why the smart money isn’t behind this stock. This isn’t necessarily bad news. Although it is possible that hedge funds may think the stock is overpriced and view the stock as a short candidate, they may not be very familiar with the bullish thesis. In either case more research is warranted.
Disclosure: None
