It was a rough fourth quarter for many hedge funds, which were naturally unable to overcome the big dip in the broad market, as the S&P 500 fell by about 4.8% during 2018 and average hedge fund losing about 1%. The Russell 2000, composed of smaller companies, performed even worse, trailing the S&P by more than 6 percentage points, as investors fled less-known quantities for safe havens. Luckily hedge funds were shifting their holdings into large-cap stocks. The 20 most popular hedge fund stocks actually generated an average return of 24.4% during the first 9 months of 2019 and outperformed the S&P 500 ETF by 4 percentage points. We are done processing the latest 13f filings and in this article we will study how hedge fund sentiment towards PNM Resources, Inc. (NYSE:PNM) changed during the first quarter.
PNM Resources, Inc. (NYSE:PNM) was in 13 hedge funds’ portfolios at the end of June. PNM has seen a decrease in hedge fund interest recently. There were 14 hedge funds in our database with PNM holdings at the end of the previous quarter. Our calculations also showed that PNM isn’t among the 30 most popular stocks among hedge funds (view the video below).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
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 40 percentage points since May 2014 through May 30, 2019 (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.
Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. We’re going to take a look at the key hedge fund action encompassing PNM Resources, Inc. (NYSE:PNM).
Hedge fund activity in PNM Resources, Inc. (NYSE:PNM)
Heading into the third quarter of 2019, a total of 13 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -7% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards PNM over the last 16 quarters. With hedge funds’ sentiment swirling, there exists a few noteworthy hedge fund managers who were increasing their holdings meaningfully (or already accumulated large positions).
More specifically, Renaissance Technologies was the largest shareholder of PNM Resources, Inc. (NYSE:PNM), with a stake worth $128.9 million reported as of the end of March. Trailing Renaissance Technologies was GAMCO Investors, which amassed a stake valued at $101 million. Citadel Investment Group, AQR Capital Management, and Millennium Management were also very fond of the stock, giving the stock large weights in their portfolios.
Judging by the fact that PNM Resources, Inc. (NYSE:PNM) has witnessed declining sentiment from the entirety of the hedge funds we track, it’s safe to say that there lies a certain “tier” of hedge funds that decided to sell off their positions entirely last quarter. Interestingly, Benjamin A. Smith’s Laurion Capital Management dropped the largest investment of the “upper crust” of funds monitored by Insider Monkey, totaling close to $0.8 million in call options. Ken Griffin’s fund, Citadel Investment Group, also sold off its call options, about $0.5 million worth. These transactions are important to note, as total hedge fund interest dropped by 1 funds last quarter.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as PNM Resources, Inc. (NYSE:PNM) but similarly valued. We will take a look at CarGurus, Inc. (NASDAQ:CARG), MSA Safety Incorporated (NYSE:MSA), Copa Holdings, S.A. (NYSE:CPA), and Penske Automotive Group, Inc. (NYSE:PAG). This group of stocks’ market valuations are similar to PNM’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CARG | 20 | 911709 | -4 |
| MSA | 14 | 79129 | -3 |
| CPA | 16 | 277754 | 2 |
| PAG | 17 | 61220 | -1 |
| Average | 16.75 | 332453 | -1.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 16.75 hedge funds with bullish positions and the average amount invested in these stocks was $332 million. That figure was $349 million in PNM’s case. CarGurus, Inc. (NASDAQ:CARG) is the most popular stock in this table. On the other hand MSA Safety Incorporated (NYSE:MSA) is the least popular one with only 14 bullish hedge fund positions. Compared to these stocks PNM Resources, Inc. (NYSE:PNM) is even less popular than MSA. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. A small number of hedge funds were also right about betting on PNM, though not to the same extent, as the stock returned 2.9% during the third quarter and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.
