In this article we are going to use hedge fund sentiment as a tool and determine whether PNC Financial Services Group Inc. (NYSE:PNC) is a good investment right now. We like to analyze hedge fund sentiment before conducting days of in-depth research. We do so because hedge funds and other elite investors have numerous Ivy League graduates, expert network advisers, and supply chain tipsters working or consulting for them. There is not a shortage of news stories covering failed hedge fund investments and it is a fact that hedge funds’ picks don’t beat the market 100% of the time, but their consensus picks have historically done very well and have outperformed the market after adjusting for risk.
Is PNC Financial Services Group Inc. (NYSE:PNC) worth your attention right now? Hedge funds were taking an optimistic view. The number of long hedge fund positions improved by 4 in recent months. PNC Financial Services Group Inc. (NYSE:PNC) was in 39 hedge funds’ portfolios at the end of the first quarter of 2021. The all time high for this statistic is 52. Our calculations also showed that PNC isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings). There were 35 hedge funds in our database with PNC positions at the end of the fourth quarter.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 206.8% since March 2017 and outperformed the S&P 500 ETFs by more than 115 percentage points (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best battery stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. Now let’s take a peek at the recent hedge fund action encompassing PNC Financial Services Group Inc. (NYSE:PNC).
Do Hedge Funds Think PNC Is A Good Stock To Buy Now?
At the end of the first quarter, a total of 39 of the hedge funds tracked by Insider Monkey were long this stock, a change of 11% from one quarter earlier. By comparison, 40 hedge funds held shares or bullish call options in PNC a year ago. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Citadel Investment Group was the largest shareholder of PNC Financial Services Group Inc. (NYSE:PNC), with a stake worth $137.3 million reported as of the end of March. Trailing Citadel Investment Group was CaaS Capital, which amassed a stake valued at $48.2 million. GAMCO Investors, Citadel Investment Group, and Adage Capital Management were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Hi-Line Capital Management allocated the biggest weight to PNC Financial Services Group Inc. (NYSE:PNC), around 2.87% of its 13F portfolio. Prospector Partners is also relatively very bullish on the stock, setting aside 1.93 percent of its 13F equity portfolio to PNC.
As one would reasonably expect, some big names were leading the bulls’ herd. Citadel Investment Group, managed by Ken Griffin, created the most valuable position in PNC Financial Services Group Inc. (NYSE:PNC). Citadel Investment Group had $137.3 million invested in the company at the end of the quarter. Frank Fu’s CaaS Capital also initiated a $48.2 million position during the quarter. The other funds with brand new PNC positions are Phill Gross and Robert Atchinson’s Adage Capital Management, Benjamin A. Smith’s Laurion Capital Management, and Clint Carlson’s Carlson Capital.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as PNC Financial Services Group Inc. (NYSE:PNC) but similarly valued. These stocks are Duke Energy Corporation (NYSE:DUK), Enbridge Inc (NYSE:ENB), Mercadolibre Inc (NASDAQ:MELI), CME Group Inc (NASDAQ:CME), CSX Corporation (NYSE:CSX), Baidu, Inc. (NASDAQ:BIDU), and Activision Blizzard, Inc. (NASDAQ:ATVI). This group of stocks’ market valuations are similar to PNC’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| DUK | 34 | 602208 | -4 |
| ENB | 22 | 144689 | -6 |
| MELI | 69 | 5223036 | -10 |
| CME | 60 | 2399257 | 2 |
| CSX | 53 | 3699622 | -5 |
| BIDU | 89 | 6572291 | 38 |
| ATVI | 76 | 3580901 | -5 |
| Average | 57.6 | 3174572 | 1.4 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 57.6 hedge funds with bullish positions and the average amount invested in these stocks was $3175 million. That figure was $419 million in PNC’s case. Baidu, Inc. (NASDAQ:BIDU) is the most popular stock in this table. On the other hand Enbridge Inc (NYSE:ENB) is the least popular one with only 22 bullish hedge fund positions. PNC Financial Services Group Inc. (NYSE:PNC) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for PNC is 44.2. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 19.3% in 2021 through June 25th and beat the market by 4.8 percentage points. A small number of hedge funds were also right about betting on PNC, though not to the same extent, as the stock returned 10.9% since the end of Q1 (through June 25th) and outperformed the market.
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Disclosure: None. This article was originally published at Insider Monkey.
