Like everyone else, elite investors make mistakes. Some of their top consensus picks, such as Amazon, Facebook and Alibaba, have not done well in Q4 due to various reasons. Nevertheless, the data show elite investors’ consensus picks have done well on average over the long-term. The top 20 stocks among hedge funds beat the S&P 500 Index ETF by 4 percentage points so far this year. Because their consensus picks have done well, we pay attention to what elite funds think before doing extensive research on a stock. In this article, we take a closer look at Pacific Biosciences of California, Inc. (NASDAQ:PACB) from the perspective of those elite funds.
Is Pacific Biosciences of California, Inc. (NASDAQ:PACB) going to take off soon? The best stock pickers are becoming more confident. The number of bullish hedge fund positions inched up by 3 lately. Our calculations also showed that PACB isn’t among the 30 most popular stocks among hedge funds (see the video below). PACB was in 22 hedge funds’ portfolios at the end of June. There were 19 hedge funds in our database with PACB holdings at the end of the previous quarter.
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 review the key hedge fund action surrounding Pacific Biosciences of California, Inc.(NASDAQ:PACB).
What have hedge funds been doing with Pacific Biosciences of California, Inc.(NASDAQ:PACB)?
At Q2’s end, a total of 22 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 16% from the previous quarter. By comparison, 12 hedge funds held shares or bullish call options in PACB a year ago. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Pacific Biosciences of California, Inc. (NASDAQ:PACB) was held by Magnetar Capital, which reported holding $48 million worth of stock at the end of March. It was followed by Alpine Associates with a $36.8 million position. Other investors bullish on the company included Water Island Capital, GLG Partners, and LMR Partners.
With a general bullishness amongst the heavyweights, specific money managers were leading the bulls’ herd. TIG Advisors, managed by Carl Tiedemann and Michael Tiedemann, assembled the largest position in Pacific Biosciences of California, Inc. (NASDAQ:PACB). TIG Advisors had $1.8 million invested in the company at the end of the quarter. Perella Weinberg Partners also initiated a $1.7 million position during the quarter. The other funds with new positions in the stock are John Overdeck and David Siegel’s Two Sigma Advisors and Gavin Saitowitz and Cisco J. del Valle’s Springbok Capital.
Let’s also examine hedge fund activity in other stocks similar to Pacific Biosciences of California, Inc. (NASDAQ:PACB). These stocks are OneSpaWorld Holdings Limited (NASDAQ:OSW), Standex International Corporation (NYSE:SXI), MAG Silver Corp. (NYSE:MAG), and Pacific Drilling SA (NYSE:PACD). This group of stocks’ market values are similar to PACB’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| OSW | 11 | 86464 | 0 |
| SXI | 9 | 32228 | -2 |
| MAG | 9 | 25008 | -2 |
| PACD | 9 | 669854 | 3 |
| Average | 9.5 | 203389 | -0.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 9.5 hedge funds with bullish positions and the average amount invested in these stocks was $203 million. That figure was $156 million in PACB’s case. OneSpaWorld Holdings Limited (NASDAQ:OSW) is the most popular stock in this table. On the other hand Standex International Corporation (NYSE:SXI) is the least popular one with only 9 bullish hedge fund positions. Compared to these stocks Pacific Biosciences of California, Inc. (NASDAQ:PACB) is more popular among hedge funds. 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. Unfortunately PACB wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on PACB were disappointed as the stock returned -14.7% during the third 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 20 most popular stocks among hedge funds as many of these stocks already outperformed the market in Q3.
Disclosure: None. This article was originally published at Insider Monkey.
