Here Is What Hedge Funds Think About PIMCO Dynamic Credit Income Fund (PCI)

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 Ackman’s recent Valeant 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 PIMCO Dynamic Credit Income Fund (NYSE:PCI).

Is PIMCO Dynamic Credit Income Fund (NYSE:PCI) a buy right now? Investors who are in the know are taking a bullish view. The number of long hedge fund bets advanced by 3 in recent months. PIMCO Dynamic Credit Income Fund (NYSE:PCI) was in 6 hedge funds’ portfolios at the end of September. There were 3 hedge funds in our database with PIMCO Dynamic Credit Income Fund (NYSE:PCI) positions at the end of the previous quarter. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity, but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Kennedy-Wilson Holdings Inc (NYSE:KW), Cree, Inc. (NASDAQ:CREE), and Univar Inc (NYSE:UNVR) to gather more data points.

In the 21st century investor’s toolkit, there are a lot of gauges investors employ to appraise publicly traded companies. A pair of the less known gauges are hedge fund and insider trading signals. We have shown that, historically, those who follow the best picks of the best investment managers can beat the market by a healthy amount (see the details here).

Now, let’s take a glance at the latest action encompassing PIMCO Dynamic Credit Income Fund (NYSE:PCI).

How are hedge funds trading PIMCO Dynamic Credit Income Fund (NYSE:PCI)?

At the end of the third quarter, a total of 6 of the hedge funds tracked by Insider Monkey held long positions in this stock, an increase of 100% from the previous quarter. With the smart money’s sentiment swirling, there exists a select group of notable hedge fund managers who were upping their stakes substantially (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, Saba Capital, managed by Boaz Weinstein, holds the most valuable position in PIMCO Dynamic Credit Income Fund (NYSE:PCI). The fund reportedly holds a $34.9 million position in the stock, comprising 2.7% of its 13F portfolio. The second most bullish fund manager is Mariner Investment Group, led by William Michaelcheck, holding a $9.6 million position; 1.9% of its 13F portfolio is allocated to the company. Hedge funds and other institutional investors that are bullish encompass Jonathan Barrett and Paul Segal’s Luminus Management, Murray Stahl’s Horizon Asset Management and Benjamin A. Smith’s Laurion Capital Management.

With a general bullishness amongst the heavyweights, key money managers were breaking ground themselves. Luminus Management established the largest position in PIMCO Dynamic Credit Income Fund (NYSE:PCI). The fund had $3.4 million invested in the company at the end of the quarter. Laurion Capital Management also made a $1.8 million investment in the stock during the quarter. The only other fund with a brand new PCI position is Charles Clough’s Clough Capital Partners.

Let’s go over hedge fund activity in other stocks similar to PIMCO Dynamic Credit Income Fund (NYSE:PCI). These stocks are Kennedy-Wilson Holdings Inc (NYSE:KW), Cree, Inc. (NASDAQ:CREE), Univar Inc (NYSE:UNVR), and Healthcare Realty Trust Inc (NYSE:HR). This group of stocks’ market caps is similar to PIMCO Dynamic Credit Income Fund (NYSE:PCI)’s market cap.

As you can see, these stocks had an average of 13 hedge funds with bullish positions and the average amount invested in these stocks was $196 million. That figure was $53 million in PIMCO Dynamic Credit Income Fund (NYSE:PCI)’s case. Kennedy-Wilson Holdings Inc (NYSE:KW) is the most popular stock in this table, whereas Healthcare Realty Trust Inc (NYSE:HR) is the least popular one, with only 10 bullish hedge fund positions. Compared to these stocks PIMCO Dynamic Credit Income Fund (NYSE:PCI) is even less popular than Healthcare Realty Trust Inc (NYSE:HR). Considering that hedge funds aren’t fond of this stock in relation to other companies compared in this article, it may be a good idea to analyze it in detail and understand why the smart money isn’t behind this stock. This isn’t necessarily bad news. Although it is possible that hedge funds may think the stock is overpriced and view the stock as a short candidate, they may not be very familiar with the bullish thesis. In either case, more research is warranted.