We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (read our latest 10 coronavirus predictions).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. We at Insider Monkey have gone over 835 13F filings that hedge funds and prominent investors are required to file by the SEC The 13F filings show the funds’ and investors’ portfolio positions as of December 31st. In this article, we look at what those funds think of Pembina Pipeline Corp (NYSE:PBA) based on that data.
Is Pembina Pipeline Corp (NYSE:PBA) a safe investment today? Hedge funds are getting more bullish. The number of bullish hedge fund positions increased by 5 lately. Our calculations also showed that PBA isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of the article for Q3 rankings). PBA was in 17 hedge funds’ portfolios at the end of December. There were 12 hedge funds in our database with PBA holdings at the end of the previous quarter.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by more than 41 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 35.3% through March 3rd. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Ray Dalio of Bridgewater Associates
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. With all of this in mind let’s analyze the latest hedge fund action encompassing Pembina Pipeline Corp (NYSE:PBA).
What have hedge funds been doing with Pembina Pipeline Corp (NYSE:PBA)?
At Q4’s end, a total of 17 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 42% from the third quarter of 2019. Below, you can check out the change in hedge fund sentiment towards PBA 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.
More specifically, D E Shaw was the largest shareholder of Pembina Pipeline Corp (NYSE:PBA), with a stake worth $15.6 million reported as of the end of September. Trailing D E Shaw was Heronetta Management, which amassed a stake valued at $6.5 million. Bridgewater Associates, Citadel Investment Group, and Two Sigma Advisors 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 Heronetta Management allocated the biggest weight to Pembina Pipeline Corp (NYSE:PBA), around 4.22% of its 13F portfolio. Signition LP is also relatively very bullish on the stock, setting aside 2.26 percent of its 13F equity portfolio to PBA.
As aggregate interest increased, key hedge funds have been driving this bullishness. Millennium Management, managed by Israel Englander, established the most valuable position in Pembina Pipeline Corp (NYSE:PBA). Millennium Management had $2.9 million invested in the company at the end of the quarter. Noam Gottesman’s GLG Partners also made a $1.7 million investment in the stock during the quarter. The following funds were also among the new PBA investors: Brad Dunkley and Blair Levinsky’s Waratah Capital Advisors, Dmitry Balyasny’s Balyasny Asset Management, and Paul Marshall and Ian Wace’s Marshall Wace LLP.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Pembina Pipeline Corp (NYSE:PBA) but similarly valued. We will take a look at CGI Inc. (NYSE:GIB), DexCom, Inc. (NASDAQ:DXCM), KeyCorp (NYSE:KEY), and Essex Property Trust Inc (NYSE:ESS). This group of stocks’ market caps are similar to PBA’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| GIB | 19 | 351250 | 3 |
| DXCM | 40 | 1052915 | 4 |
| KEY | 36 | 778453 | 6 |
| ESS | 33 | 568820 | 14 |
| Average | 32 | 687860 | 6.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 32 hedge funds with bullish positions and the average amount invested in these stocks was $688 million. That figure was $49 million in PBA’s case. DexCom, Inc. (NASDAQ:DXCM) is the most popular stock in this table. On the other hand CGI Inc. (NYSE:GIB) is the least popular one with only 19 bullish hedge fund positions. Compared to these stocks Pembina Pipeline Corp (NYSE:PBA) is even less popular than GIB. Hedge funds dodged a bullet by taking a bearish stance towards PBA. Our calculations showed that the top 20 most popular hedge fund stocks returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 22.3% in 2020 through March 16th but managed to beat the market by 3.2 percentage points. Unfortunately PBA wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); PBA investors were disappointed as the stock returned -55.8% 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 most of these stocks already outperformed the market so far in Q1.
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.
