We know that hedge funds generate strong, risk-adjusted returns over the long run, therefore imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, smart money investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do (like Peltz’s recent General Electric losses). However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, as the current round of 13F filings has just ended, let’s examine the smart money sentiment towards Paramount Group Inc (NYSE:PGRE).
Is Paramount Group Inc (NYSE:PGRE) a buy, sell, or hold? Prominent investors are getting more optimistic. The number of bullish hedge fund bets advanced by 5 lately. Our calculations also showed that PGRE isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). PGRE was in 18 hedge funds’ portfolios at the end of September. There were 13 hedge funds in our database with PGRE positions at the end of the previous quarter.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (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 27.8% through November 21, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Bruce Kovner of Caxton Associates
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds‘ buy/sell signals. We’re going to go over the fresh hedge fund action surrounding Paramount Group Inc (NYSE:PGRE).
How have hedgies been trading Paramount Group Inc (NYSE:PGRE)?
At the end of the third quarter, a total of 18 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 38% from the second quarter of 2019. By comparison, 12 hedge funds held shares or bullish call options in PGRE a year ago. With hedgies’ positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were increasing their stakes substantially (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, John Khoury’s Long Pond Capital has the number one position in Paramount Group Inc (NYSE:PGRE), worth close to $120.1 million, comprising 3.1% of its total 13F portfolio. On Long Pond Capital’s heels of Renaissance Technologies, with a $78.4 million position; the fund has 0.1% of its 13F portfolio invested in the stock. Other professional money managers that hold long positions encompass Noam Gottesman’s GLG Partners, Ken Griffin’s Citadel Investment Group and Israel Englander’s Millennium Management. In terms of the portfolio weights assigned to each position Long Pond Capital allocated the biggest weight to Paramount Group Inc (NYSE:PGRE), around 3.13% of its 13F portfolio. GLG Partners is also relatively very bullish on the stock, setting aside 0.13 percent of its 13F equity portfolio to PGRE.
With a general bullishness amongst the heavyweights, specific money managers were leading the bulls’ herd. ExodusPoint Capital, managed by Michael Gelband, initiated the most valuable position in Paramount Group Inc (NYSE:PGRE). ExodusPoint Capital had $0.9 million invested in the company at the end of the quarter. Cliff Asness’s AQR Capital Management also made a $0.6 million investment in the stock during the quarter. The following funds were also among the new PGRE investors: Bruce Kovner’s Caxton Associates and Paul Marshall and Ian Wace’s Marshall Wace.
Let’s now take a look at hedge fund activity in other stocks similar to Paramount Group Inc (NYSE:PGRE). We will take a look at Cantel Medical Corp. (NYSE:CMD), Virtu Financial Inc (NASDAQ:VIRT), TreeHouse Foods Inc. (NYSE:THS), and Kennedy-Wilson Holdings Inc (NYSE:KW). This group of stocks’ market values match PGRE’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CMD | 11 | 149052 | 0 |
| VIRT | 13 | 89772 | -3 |
| THS | 18 | 241573 | 1 |
| KW | 18 | 499215 | 5 |
| Average | 15 | 244903 | 0.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 15 hedge funds with bullish positions and the average amount invested in these stocks was $245 million. That figure was $293 million in PGRE’s case. TreeHouse Foods Inc. (NYSE:THS) is the most popular stock in this table. On the other hand Cantel Medical Corp. (NYSE:CMD) is the least popular one with only 11 bullish hedge fund positions. Paramount Group Inc (NYSE:PGRE) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but 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 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately PGRE wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on PGRE were disappointed as the stock returned 1.8% during the fourth quarter (through the end of November) 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 so far this year.
Disclosure: None. This article was originally published at Insider Monkey.
