Coronavirus is probably the #1 concern in investors’ minds right now. It should be. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW. We predicted that a US recession is imminent and US stocks will go down by at least 20% in the next 3-6 months. We also told you to short the market ETFs and buy long-term bonds. Investors who agreed with us and replicated these trades are up double digits whereas the market is down double digits. Our article also called for a total international travel ban to prevent the spread of the coronavirus especially from Europe. We were one step ahead of the markets and the president (see why hell is coming).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. At Insider Monkey, we pore over the filings of nearly 835 top investment firms every quarter, a process we have now completed for the latest reporting period. The data we’ve gathered as a result gives us access to a wealth of collective knowledge based on these firms’ portfolio holdings as of December 31. In this article, we will use that wealth of knowledge to determine whether or not PACCAR Inc (NASDAQ:PCAR) makes for a good investment right now.
PACCAR Inc (NASDAQ:PCAR) has seen an increase in activity from the world’s largest hedge funds of late. Our calculations also showed that PCAR isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).
At the moment there are a large number of signals shareholders use to value publicly traded companies. A duo of the most innovative signals are hedge fund and insider trading sentiment. We have shown that, historically, those who follow the top picks of the best hedge fund managers can trounce their index-focused peers by a solid amount (see the details here).
David Harding of Winton Capital Management
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 take a peek at the fresh hedge fund action regarding PACCAR Inc (NASDAQ:PCAR).
How have hedgies been trading PACCAR Inc (NASDAQ:PCAR)?
At the end of the fourth quarter, a total of 36 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 29% from the third quarter of 2019. The graph below displays the number of hedge funds with bullish position in PCAR over the last 18 quarters. With hedgies’ positions undergoing their usual ebb and flow, there exists a select group of noteworthy hedge fund managers who were upping their holdings meaningfully (or already accumulated large positions).
According to Insider Monkey’s hedge fund database, Cliff Asness’s AQR Capital Management has the largest position in PACCAR Inc (NASDAQ:PCAR), worth close to $62.3 million, comprising 0.1% of its total 13F portfolio. Coming in second is Adage Capital Management, managed by Phill Gross and Robert Atchinson, which holds a $35.7 million position; the fund has 0.1% of its 13F portfolio invested in the stock. Other members of the smart money that are bullish encompass Mario Gabelli’s GAMCO Investors, Alexander Mitchell’s Scopus Asset Management and David Harding’s Winton Capital Management. In terms of the portfolio weights assigned to each position Appian Way Asset Management allocated the biggest weight to PACCAR Inc (NASDAQ:PCAR), around 2.71% of its 13F portfolio. Pinz Capital is also relatively very bullish on the stock, setting aside 0.84 percent of its 13F equity portfolio to PCAR.
As industrywide interest jumped, some big names were breaking ground themselves. Scopus Asset Management, managed by Alexander Mitchell, assembled the most outsized position in PACCAR Inc (NASDAQ:PCAR). Scopus Asset Management had $17.6 million invested in the company at the end of the quarter. David Harding’s Winton Capital Management also initiated a $11.2 million position during the quarter. The other funds with new positions in the stock are Paul Marshall and Ian Wace’s Marshall Wace LLP, Andrew Byington’s Appian Way Asset Management, and Matthew L Pinz’s Pinz Capital.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as PACCAR Inc (NASDAQ:PCAR) but similarly valued. These stocks are SBA Communications Corporation (NASDAQ:SBAC), Edison International (NYSE:EIX), MPLX LP (NYSE:MPLX), and Square, Inc. (NYSE:SQ). All of these stocks’ market caps resemble PCAR’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| SBAC | 45 | 1560377 | 4 |
| EIX | 34 | 1611946 | 6 |
| MPLX | 15 | 438138 | 0 |
| SQ | 56 | 2386749 | 6 |
| Average | 37.5 | 1499303 | 4 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 37.5 hedge funds with bullish positions and the average amount invested in these stocks was $1499 million. That figure was $216 million in PCAR’s case. Square, Inc. (NYSE:SQ) is the most popular stock in this table. On the other hand MPLX LP (NYSE:MPLX) is the least popular one with only 15 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. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 17.4% in 2020 through March 25th but beat the market by 5.5 percentage points. Unfortunately PCAR wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); PCAR investors were disappointed as the stock returned -25.1% 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 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.
