Coronavirus is probably the #1 concern in investors’ minds right now. It should be. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW. We predicted that a US recession is imminent and US stocks will go down by at least 20% in the next 3-6 months. We also told you to short the market ETFs and buy long-term bonds. Investors who agreed with us and replicated these trades are up double digits whereas the market is down double digits. Our article also called for a total international travel ban to prevent the spread of the coronavirus especially from Europe. We were one step ahead of the markets and the president (see why hell is coming).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. Is Paramount Group Inc (NYSE:PGRE) a good place to invest some of your money right now? We can gain invaluable insight to help us answer that question by studying the investment trends of top investors, who employ world-class Ivy League graduates, who are given immense resources and industry contacts to put their financial expertise to work. The top picks of these firms have historically outperformed the market when we account for known risk factors, making them very valuable investment ideas.
Is Paramount Group Inc (NYSE:PGRE) ready to rally soon? The smart money is getting less bullish. The number of long hedge fund bets shrunk by 2 lately. Our calculations also showed that PGRE isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings). PGRE was in 20 hedge funds’ portfolios at the end of the fourth quarter of 2019. There were 22 hedge funds in our database with PGRE holdings at the end of the previous quarter.
In today’s marketplace there are several gauges stock market investors employ to analyze stocks. A duo of the less known gauges are hedge fund and insider trading sentiment. Our experts have shown that, historically, those who follow the top picks of the top money managers can outpace the broader indices by a solid margin (see the details here).
Jeffrey Altman of Owl Creek Asset Management
We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind we’re going to take a look at the fresh hedge fund action surrounding Paramount Group Inc (NYSE:PGRE).
What does smart money think about Paramount Group Inc (NYSE:PGRE)?
At Q4’s end, a total of 20 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -9% from the previous quarter. On the other hand, there were a total of 14 hedge funds with a bullish position in PGRE a year ago. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Long Pond Capital was the largest shareholder of Paramount Group Inc (NYSE:PGRE), with a stake worth $142.4 million reported as of the end of September. Trailing Long Pond Capital was Renaissance Technologies, which amassed a stake valued at $69.2 million. Owl Creek Asset Management, Citadel Investment Group, and GLG Partners were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Hill Winds Capital allocated the biggest weight to Paramount Group Inc (NYSE:PGRE), around 6.29% of its 13F portfolio. Long Pond Capital is also relatively very bullish on the stock, designating 3.64 percent of its 13F equity portfolio to PGRE.
Judging by the fact that Paramount Group Inc (NYSE:PGRE) has faced declining sentiment from hedge fund managers, it’s safe to say that there lies a certain “tier” of money managers that decided to sell off their positions entirely by the end of the third quarter. It’s worth mentioning that Matthew Tewksbury’s Stevens Capital Management cut the biggest position of the 750 funds followed by Insider Monkey, valued at close to $0.6 million in stock. Ran Pang’s fund, Quantamental Technologies, also sold off its stock, about $0.5 million worth. These moves are important to note, as total hedge fund interest was cut by 2 funds by the end of the third quarter.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Paramount Group Inc (NYSE:PGRE) but similarly valued. These stocks are EnerSys (NYSE:ENS), Gol Linhas Aereas Inteligentes SA (NYSE:GOL), American National Insurance Company (NASDAQ:ANAT), and QTS Realty Trust Inc (NYSE:QTS). This group of stocks’ market caps match PGRE’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| ENS | 13 | 71202 | -6 |
| GOL | 12 | 218734 | 1 |
| ANAT | 16 | 62011 | -1 |
| QTS | 23 | 326983 | -4 |
| Average | 16 | 169733 | -2.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 16 hedge funds with bullish positions and the average amount invested in these stocks was $170 million. That figure was $362 million in PGRE’s case. QTS Realty Trust Inc (NYSE:QTS) is the most popular stock in this table. On the other hand Gol Linhas Aereas Inteligentes SA (NYSE:GOL) is the least popular one with only 12 bullish hedge fund positions. Paramount Group Inc (NYSE:PGRE) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 17.4% in 2020 through March 25th but beat the market by 5.5 percentage points. Unfortunately PGRE wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on PGRE were disappointed as the stock returned -42% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
