We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (see why hell is coming).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. Before we spend countless hours researching a company, we like to analyze what insiders, hedge funds and billionaire investors think of the stock first. This is a necessary first step in our investment process because our research has shown that the elite investors’ consensus returns have been exceptional. In the following paragraphs, we find out what the billionaire investors and hedge funds think of PotlatchDeltic Corporation (NASDAQ:PCH).
PotlatchDeltic Corporation (NASDAQ:PCH) investors should pay attention to a decrease in enthusiasm from smart money in recent months. PCH was in 16 hedge funds’ portfolios at the end of the fourth quarter of 2019. There were 20 hedge funds in our database with PCH holdings at the end of the previous quarter. Our calculations also showed that PCH isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).
To the average investor there are a large number of tools market participants can use to grade their stock investments. A pair of the less utilized tools are hedge fund and insider trading moves. We have shown that, historically, those who follow the best picks of the top investment managers can outpace the broader indices by a healthy margin (see the details here).
Mason Hawkins of Southeastern Asset Management
We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind let’s analyze the latest hedge fund action surrounding PotlatchDeltic Corporation (NASDAQ:PCH).
What have hedge funds been doing with PotlatchDeltic Corporation (NASDAQ:PCH)?
Heading into the first quarter of 2020, a total of 16 of the hedge funds tracked by Insider Monkey were long this stock, a change of -20% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in PCH over the last 18 quarters. With hedge funds’ sentiment swirling, there exists a select group of noteworthy hedge fund managers who were upping their holdings substantially (or already accumulated large positions).
More specifically, Southeastern Asset Management was the largest shareholder of PotlatchDeltic Corporation (NASDAQ:PCH), with a stake worth $171.3 million reported as of the end of September. Trailing Southeastern Asset Management was Renaissance Technologies, which amassed a stake valued at $111.9 million. Citadel Investment Group, Ancora Advisors, and Millennium 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 Southeastern Asset Management allocated the biggest weight to PotlatchDeltic Corporation (NASDAQ:PCH), around 2.85% of its 13F portfolio. Intrepid Capital Management is also relatively very bullish on the stock, setting aside 1.85 percent of its 13F equity portfolio to PCH.
Due to the fact that PotlatchDeltic Corporation (NASDAQ:PCH) has faced bearish sentiment from the aggregate hedge fund industry, it’s easy to see that there was a specific group of hedge funds that elected to cut their entire stakes last quarter. It’s worth mentioning that Mark Coe’s Intrinsic Edge Capital dumped the largest stake of the “upper crust” of funds watched by Insider Monkey, totaling about $7.4 million in stock, and Dmitry Balyasny’s Balyasny Asset Management was right behind this move, as the fund said goodbye to about $1.1 million worth. These moves are important to note, as aggregate hedge fund interest was cut by 4 funds last quarter.
Let’s also examine hedge fund activity in other stocks similar to PotlatchDeltic Corporation (NASDAQ:PCH). We will take a look at Power Integrations Inc (NASDAQ:POWI), GATX Corporation (NYSE:GATX), Triton International Limited (NYSE:TRTN), and AllianceBernstein Holding LP (NYSE:AB). This group of stocks’ market valuations match PCH’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| POWI | 17 | 62740 | 4 |
| GATX | 21 | 227877 | 5 |
| TRTN | 16 | 56386 | 1 |
| AB | 11 | 53571 | 3 |
| Average | 16.25 | 100144 | 3.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 16.25 hedge funds with bullish positions and the average amount invested in these stocks was $100 million. That figure was $346 million in PCH’s case. GATX Corporation (NYSE:GATX) is the most popular stock in this table. On the other hand AllianceBernstein Holding LP (NYSE:AB) is the least popular one with only 11 bullish hedge fund positions. PotlatchDeltic Corporation (NASDAQ:PCH) 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 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 17.4% in 2020 through March 25th but beat the market by 5.5 percentage points. Unfortunately PCH wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); PCH investors were disappointed as the stock returned -28.1% during the same time period 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 most of these stocks already outperformed the market in Q1.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
