Before we spend days researching a stock idea we’d like to take a look at how hedge funds and billionaire investors recently traded that stock. S&P 500 Index ETF (SPY) lost 13.5% in the fourth quarter. Seven out of 11 industry groups in the S&P 500 Index were down more than 20% from their 52-week highs at the trough of the stock market crash. The average return of a randomly picked stock in the index was even worse. This means you (or a monkey throwing a dart) have less than an even chance of beating the market by randomly picking a stock. On the other hand, the top 15 most popular S&P 500 stocks among hedge funds not only recouped their Q4 losses but also outperformed the index by more than 3 percentage points. In this article, we will take a look at what hedge funds think about PacWest Bancorp (NASDAQ:PACW).
Is PacWest Bancorp (NASDAQ:PACW) a buy here? Money managers are in a bearish mood. The number of long hedge fund positions were cut by 5 lately. Our calculations also showed that PACW isn’t among the 30 most popular stocks among hedge funds. PACW was in 21 hedge funds’ portfolios at the end of the fourth quarter of 2018. There were 26 hedge funds in our database with PACW positions at the end of the previous quarter.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 32 percentage points since May 2014 through March 12, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 27.5% through March 12, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
We’re going to go over the new hedge fund action regarding PacWest Bancorp (NASDAQ:PACW).
What does the smart money think about PacWest Bancorp (NASDAQ:PACW)?
At the end of the fourth quarter, a total of 21 of the hedge funds tracked by Insider Monkey were long this stock, a change of -19% from the second quarter of 2018. The graph below displays the number of hedge funds with bullish position in PACW over the last 14 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in PacWest Bancorp (NASDAQ:PACW) was held by Cardinal Capital, which reported holding $83.8 million worth of stock at the end of September. It was followed by Fisher Asset Management with a $28.2 million position. Other investors bullish on the company included Marshall Wace LLP, Basswood Capital, and Renaissance Technologies.
Seeing as PacWest Bancorp (NASDAQ:PACW) has experienced a decline in interest from the smart money, we can see that there lies a certain “tier” of fund managers who sold off their positions entirely heading into Q3. At the top of the heap, Anton Schutz’s Mendon Capital Advisors said goodbye to the biggest stake of the 700 funds followed by Insider Monkey, comprising close to $8.3 million in stock. Glenn Russell Dubin’s fund, Highbridge Capital Management, also said goodbye to its stock, about $5.9 million worth. These transactions are important to note, as total hedge fund interest was cut by 5 funds heading into Q3.
Let’s go over hedge fund activity in other stocks similar to PacWest Bancorp (NASDAQ:PACW). These stocks are Kinross Gold Corporation (NYSE:KGC), Murphy Oil Corporation (NYSE:MUR), New Jersey Resources Corp (NYSE:NJR), and Assured Guaranty Ltd. (NYSE:AGO). This group of stocks’ market values match PACW’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| KGC | 17 | 300562 | -1 |
| MUR | 18 | 181712 | -5 |
| NJR | 18 | 92769 | 6 |
| AGO | 33 | 571123 | 0 |
| Average | 21.5 | 286542 | 0 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 21.5 hedge funds with bullish positions and the average amount invested in these stocks was $287 million. That figure was $210 million in PACW’s case. Assured Guaranty Ltd. (NYSE:AGO) is the most popular stock in this table. On the other hand Kinross Gold Corporation (NYSE:KGC) is the least popular one with only 17 bullish hedge fund positions. PacWest Bancorp (NASDAQ:PACW) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. A small number of hedge funds were also right about betting on PACW, though not to the same extent, as the stock returned 18.4% and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.
