Hedge Funds Are Nibbling On POSCO (PKX)

The latest 13F reporting period has come and gone, and Insider Monkey have plowed through 821 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of March 31st, a week after the market trough. Now, we are almost done with the second quarter. Investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned almost 20% this quarter. In this article you are going to find out whether hedge funds thoughtPOSCO (NYSE:PKX) was a good investment heading into the second quarter and how the stock traded in comparison to the top hedge fund picks.

Is POSCO (NYSE:PKX) undervalued? Investors who are in the know were buying. The number of long hedge fund positions increased by 1 lately. Our calculations also showed that PKX isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).

Video: Watch our video about the top 5 most popular hedge fund stocks.

Today there are plenty of tools stock market investors use to value their stock investments. A duo of the most under-the-radar tools are hedge fund and insider trading indicators. Our researchers have shown that, historically, those who follow the top picks of the top fund managers can beat the S&P 500 by a healthy amount (see the details here).

Peter Rathjens of Arrowstreet Capital

At Insider Monkey we scour multiple sources to uncover the next great investment idea. There is a lot of volatility in the markets and this presents amazing investment opportunities from time to time. For example, this trader claims to deliver juiced up returns with one trade a week, so we are checking out his highest conviction idea. A second trader claims to score lucrative profits by utilizing a “weekend trading strategy”, so we look into his strategy’s picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We recently recommended several stocks partly inspired by legendary Bill Miller’s investor letter. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind we’re going to take a look at the latest hedge fund action surrounding POSCO (NYSE:PKX).

Hedge fund activity in POSCO (NYSE:PKX)

At the end of the first quarter, a total of 11 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 10% from the previous quarter. The graph below displays the number of hedge funds with bullish position in PKX over the last 18 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Of the funds tracked by Insider Monkey, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital has the number one position in POSCO (NYSE:PKX), worth close to $19.8 million, amounting to 0.1% of its total 13F portfolio. On Arrowstreet Capital’s heels is Pzena Investment Management, led by Richard S. Pzena, holding a $9.6 million position; the fund has 0.1% of its 13F portfolio invested in the stock. Other hedge funds and institutional investors with similar optimism consist of D. E. Shaw’s D E Shaw, Simon Sadler’s Segantii Capital and Israel Englander’s Millennium Management. In terms of the portfolio weights assigned to each position Qtron Investments allocated the biggest weight to POSCO (NYSE:PKX), around 0.29% of its 13F portfolio. Segantii Capital is also relatively very bullish on the stock, earmarking 0.16 percent of its 13F equity portfolio to PKX.

As aggregate interest increased, key money managers have been driving this bullishness. Segantii Capital, managed by Simon Sadler, initiated the most valuable position in POSCO (NYSE:PKX). Segantii Capital had $2 million invested in the company at the end of the quarter. Paul Marshall and Ian Wace’s Marshall Wace LLP also made a $1.1 million investment in the stock during the quarter. The other funds with brand new PKX positions are Ken Griffin’s Citadel Investment Group, Ronald Hua’s Qtron Investments, and Donald Sussman’s Paloma Partners.

Let’s also examine hedge fund activity in other stocks similar to POSCO (NYSE:PKX). These stocks are Vipshop Holdings Limited (NYSE:VIPS), Burlington Stores Inc (NYSE:BURL), Liberty Global plc (NASDAQ:LBTYA), and Insulet Corporation (NASDAQ:PODD). This group of stocks’ market valuations resemble PKX’s market valuation.

View table here if you experience formatting issues.

As you can see these stocks had an average of 34 hedge funds with bullish positions and the average amount invested in these stocks was $738 million. That figure was $41 million in PKX’s case. Burlington Stores Inc (NYSE:BURL) is the most popular stock in this table. On the other hand Vipshop Holdings Limited (NYSE:VIPS) is the least popular one with only 30 bullish hedge fund positions. Compared to these stocks POSCO (NYSE:PKX) is even less popular than VIPS. Hedge funds dodged a bullet by taking a bearish stance towards PKX. Our calculations showed that the top 10 most popular hedge fund stocks returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 12.3% in 2020 through June 30th but managed to beat the market by 15.5 percentage points. Unfortunately PKX wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was very bearish); PKX investors were disappointed as the stock returned 13.4% during the second quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market so far in 2020.

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