Amid an overall bull market, many stocks that smart money investors were collectively bullish on surged through October 17th. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 45% and 39% respectively. Our research shows that most of the stocks that smart money likes historically generate strong risk-adjusted returns. That’s why we weren’t surprised when hedge funds’ top 20 large-cap stock picks generated a return of 24.4% during the first 9 months of 2019 and outperformed the broader market benchmark by 4 percentage points.This is why following the smart money sentiment is a useful tool at identifying the next stock to invest in.
Provident Financial Services, Inc. (NYSE:PFS) investors should be aware of an increase in hedge fund interest of late. PFS was in 11 hedge funds’ portfolios at the end of the second quarter of 2019. There were 6 hedge funds in our database with PFS positions at the end of the previous quarter. Our calculations also showed that PFS isn’t among the 30 most popular stocks among hedge funds (see the video below).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
To most stock holders, hedge funds are assumed to be unimportant, outdated financial tools of yesteryear. While there are over 8000 funds in operation at the moment, Our researchers hone in on the aristocrats of this group, about 750 funds. These investment experts control the lion’s share of all hedge funds’ total asset base, and by monitoring their finest equity investments, Insider Monkey has brought to light various investment strategies that have historically outstripped Mr. Market. Insider Monkey’s flagship hedge fund strategy beat the S&P 500 index by around 5 percentage points a year since its inception in May 2014. We were able to generate large returns even by identifying short candidates. Our portfolio of short stocks lost 25.7% since February 2017 (through September 30th) even though the market was up more than 33% during the same period. We just shared a list of 10 short targets in our latest quarterly update .
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. Let’s take a gander at the recent hedge fund action regarding Provident Financial Services, Inc. (NYSE:PFS).
What have hedge funds been doing with Provident Financial Services, Inc. (NYSE:PFS)?
At the end of the second quarter, a total of 11 of the hedge funds tracked by Insider Monkey were long this stock, a change of 83% from the first quarter of 2019. By comparison, 7 hedge funds held shares or bullish call options in PFS a year ago. With hedge funds’ positions undergoing their usual ebb and flow, there exists an “upper tier” of key hedge fund managers who were upping their holdings considerably (or already accumulated large positions).
Among these funds, Renaissance Technologies held the most valuable stake in Provident Financial Services, Inc. (NYSE:PFS), which was worth $32.5 million at the end of the second quarter. On the second spot was Millennium Management which amassed $17.2 million worth of shares. Moreover, Citadel Investment Group, Marshall Wace LLP, and Two Sigma Advisors were also bullish on Provident Financial Services, Inc. (NYSE:PFS), allocating a large percentage of their portfolios to this stock.
As one would reasonably expect, specific money managers have jumped into Provident Financial Services, Inc. (NYSE:PFS) headfirst. Marshall Wace LLP, managed by Paul Marshall and Ian Wace, established the biggest position in Provident Financial Services, Inc. (NYSE:PFS). Marshall Wace LLP had $1 million invested in the company at the end of the quarter. John Overdeck and David Siegel’s Two Sigma Advisors also made a $0.5 million investment in the stock during the quarter. The other funds with brand new PFS positions are David Harding’s Winton Capital Management, Benjamin A. Smith’s Laurion Capital Management, and Matthew Tewksbury’s Stevens Capital Management.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Provident Financial Services, Inc. (NYSE:PFS) but similarly valued. We will take a look at Madrigal Pharmaceuticals, Inc. (NASDAQ:MDGL), Aircastle Limited (NYSE:AYR), BP Midstream Partners LP (NYSE:BPMP), and Studio City International Holdings Limited (NYSE:MSC). This group of stocks’ market values match PFS’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| MDGL | 12 | 360275 | -7 |
| AYR | 12 | 77868 | 0 |
| BPMP | 5 | 32326 | -1 |
| MSC | 4 | 237508 | 0 |
| Average | 8.25 | 176994 | -2 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 8.25 hedge funds with bullish positions and the average amount invested in these stocks was $177 million. That figure was $57 million in PFS’s case. Madrigal Pharmaceuticals, Inc. (NASDAQ:MDGL) is the most popular stock in this table. On the other hand Studio City International Holdings Limited (NYSE:MSC) is the least popular one with only 4 bullish hedge fund positions. Provident Financial Services, Inc. (NYSE:PFS) is not the most popular stock in this group but hedge fund interest is still above average. 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. Hedge funds were also right about betting on PFS, though not to the same extent, as the stock returned 2.1% during the third quarter and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.
