Last year’s fourth quarter was a rough one for investors and many hedge funds, which were naturally unable to overcome the big dip in the broad market, as the S&P 500 fell by about 4.8% during 2018 and average hedge fund losing about 1%. The Russell 2000, composed of smaller companies, performed even worse, trailing the S&P by more than 6 percentage points, as investors fled less-known quantities for safe havens. Luckily hedge funds were shifting their holdings into large-cap stocks. The 20 most popular hedge fund stocks actually generated an average return of 37.4% in 2019 (through the end of November) and outperformed the S&P 500 ETF by 9.9 percentage points. We are done processing the latest 13F filings and in this article we will study how hedge fund sentiment towards PS Business Parks Inc (NYSE:PSB) changed during the first quarter.
PS Business Parks Inc (NYSE:PSB) has seen an increase in hedge fund interest in recent months. Our calculations also showed that PSB isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
If you’d ask most investors, hedge funds are seen as unimportant, old financial vehicles of the past. While there are greater than 8000 funds in operation today, We hone in on the masters of this group, around 750 funds. Most estimates calculate that this group of people control bulk of all hedge funds’ total asset base, and by observing their unrivaled investments, Insider Monkey has come up with a few investment strategies that have historically outstripped Mr. Market. Insider Monkey’s flagship short hedge fund strategy exceeded the S&P 500 short ETFs by around 20 percentage points per year since its inception in May 2014. Our portfolio of short stocks lost 27.8% since February 2017 (through November 21st) even though the market was up more than 39% during the same period. We just shared a list of 7 short targets in our latest quarterly update .
Cliff Asness of AQR Capital Management
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 analyze the key hedge fund action regarding PS Business Parks Inc (NYSE:PSB).
How are hedge funds trading PS Business Parks Inc (NYSE:PSB)?
At the end of the third quarter, a total of 17 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 21% from one quarter earlier. By comparison, 6 hedge funds held shares or bullish call options in PSB a year ago. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, David Harding’s Winton Capital Management has the number one position in PS Business Parks Inc (NYSE:PSB), worth close to $38 million, corresponding to 0.4% of its total 13F portfolio. Sitting at the No. 2 spot is AQR Capital Management, led by Cliff Asness, holding a $6.5 million position; less than 0.1%% of its 13F portfolio is allocated to the company. Remaining members of the smart money with similar optimism comprise John Overdeck and David Siegel’s Two Sigma Advisors, Noam Gottesman’s GLG Partners and Peter Algert and Kevin Coldiron’s Algert Coldiron Investors. In terms of the portfolio weights assigned to each position Zebra Capital Management allocated the biggest weight to PS Business Parks Inc (NYSE:PSB), around 1.45% of its 13F portfolio. Algert Coldiron Investors is also relatively very bullish on the stock, dishing out 0.78 percent of its 13F equity portfolio to PSB.
With a general bullishness amongst the heavyweights, key hedge funds have been driving this bullishness. Stevens Capital Management, managed by Matthew Tewksbury, created the most outsized position in PS Business Parks Inc (NYSE:PSB). Stevens Capital Management had $0.4 million invested in the company at the end of the quarter. Thomas Bailard’s Bailard Inc also made a $0.3 million investment in the stock during the quarter. The other funds with new positions in the stock are Mike Vranos’s Ellington, Donald Sussman’s Paloma Partners, and Ronald Hua’s Qtron Investments.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as PS Business Parks Inc (NYSE:PSB) but similarly valued. These stocks are OneMain Holdings Inc (NYSE:OMF), Wyndham Hotels & Resorts, Inc. (NYSE:WH), Hawaiian Electric Industries, Inc. (NYSE:HE), and Nutanix, Inc. (NASDAQ:NTNX). All of these stocks’ market caps are closest to PSB’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| OMF | 26 | 398536 | -1 |
| WH | 36 | 800953 | -4 |
| HE | 14 | 189464 | -3 |
| NTNX | 24 | 320502 | -1 |
| Average | 25 | 427364 | -2.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 25 hedge funds with bullish positions and the average amount invested in these stocks was $427 million. That figure was $60 million in PSB’s case. Wyndham Hotels & Resorts, Inc. (NYSE:WH) is the most popular stock in this table. On the other hand Hawaiian Electric Industries, Inc. (NYSE:HE) is the least popular one with only 14 bullish hedge fund positions. PS Business Parks Inc (NYSE:PSB) 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 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately PSB wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); PSB investors were disappointed as the stock returned -2.9% during the first two months of the fourth 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 70 percent of these stocks already outperformed the market in Q4.
Disclosure: None. This article was originally published at Insider Monkey.
