Hedge Funds Are Getting Out Of PACCAR Inc (PCAR)

Although the masses and most of the financial media blame hedge funds for their exorbitant fee structure and disappointing performance, these investors have proved to have great stock picking abilities over the years (that’s why their assets under management continue to swell). We believe hedge fund sentiment should serve as a crucial tool of an individual investor’s stock selection process, as it may offer great insights of how the brightest minds of the finance industry feel about specific stocks. After all, these people have access to the smartest analysts and expensive data/information sources that individual investors can’t match. So should one consider investing in PACCAR Inc (NASDAQ:PCAR)? The smart money sentiment can provide an answer to this question.

Is PACCAR Inc (NASDAQ:PCAR) ready to rally soon? Money managers were becoming less hopeful. The number of long hedge fund bets were trimmed by 2 in recent months. PACCAR Inc (NASDAQ:PCAR) was in 26 hedge funds’ portfolios at the end of the third quarter of 2021. The all time high for this statistic is 38. Our calculations also showed that PCAR isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings). There were 28 hedge funds in our database with PCAR holdings at the end of June.

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. Keeping this in mind we’re going to go over the new hedge fund action regarding PACCAR Inc (NASDAQ:PCAR).

Cliff Asness of AQR Capital Management

Do Hedge Funds Think PCAR Is A Good Stock To Buy Now?

Heading into the fourth quarter of 2021, a total of 26 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -7% from the second quarter of 2021. Below, you can check out the change in hedge fund sentiment towards PCAR over the last 25 quarters. With hedgies’ sentiment swirling, there exists a few noteworthy hedge fund managers who were adding to their holdings significantly (or already accumulated large positions).

Among these funds, AQR Capital Management held the most valuable stake in PACCAR Inc (NASDAQ:PCAR), which was worth $85.9 million at the end of the third quarter. On the second spot was D E Shaw which amassed $83.5 million worth of shares. Citadel Investment Group, Millennium Management, and Renaissance Technologies 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 Sirios Capital Management allocated the biggest weight to PACCAR Inc (NASDAQ:PCAR), around 1.74% of its 13F portfolio. Arosa Capital Management is also relatively very bullish on the stock, designating 0.59 percent of its 13F equity portfolio to PCAR.

Judging by the fact that PACCAR Inc (NASDAQ:PCAR) has experienced declining sentiment from the entirety of the hedge funds we track, it’s easy to see that there lies a certain “tier” of funds who were dropping their full holdings heading into Q4. Intriguingly, Catherine D. Wood’s ARK Investment Management dropped the largest position of the 750 funds monitored by Insider Monkey, comprising about $27 million in stock, and Dmitry Balyasny’s Balyasny Asset Management was right behind this move, as the fund dumped about $23.8 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest dropped by 2 funds heading into Q4.

Let’s now review hedge fund activity in other stocks similar to PACCAR Inc (NASDAQ:PCAR). These stocks are Delta Air Lines, Inc. (NYSE:DAL), Skyworks Solutions Inc (NASDAQ:SWKS), Bill.com Holdings, Inc. (NYSE:BILL), Li Auto Inc. (NASDAQ:LI), Laboratory Corp. of America Holdings (NYSE:LH), UiPath Inc. (NYSE:PATH), and AppLovin Corporation (NASDAQ:APP). This group of stocks’ market values resemble PCAR’s market value.

View table here if you experience formatting issues.

As you can see these stocks had an average of 40 hedge funds with bullish positions and the average amount invested in these stocks was $2033 million. That figure was $472 million in PCAR’s case. Bill.com Holdings, Inc. (NYSE:BILL) is the most popular stock in this table. On the other hand Li Auto Inc. (NASDAQ:LI) is the least popular one with only 20 bullish hedge fund positions. PACCAR Inc (NASDAQ:PCAR) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for PCAR is 30.2. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 31.1% in 2021 through December 9th and still beat the market by 5.1 percentage points. A small number of hedge funds were also right about betting on PCAR as the stock returned 12.7% since the end of the third quarter (through 12/9) and outperformed the market by an even larger margin.

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Disclosure: None. This article was originally published at Insider Monkey.