“Value has performed relatively poorly since the 2017 shift, but we believe challenges to the S&P 500’s dominance are mounting and resulting active opportunities away from the index are growing. At some point, this fault line will break, likely on the back of rising rates, and all investors will be reminded that the best time to diversify away from the winners is when it is most painful. The bargain of capturing long-term value may be short-term pain, but enough is eventually enough and it comes time to harvest the benefits.,” said Clearbridge Investments in its market commentary. We aren’t sure whether long-term interest rates will top 5% and value stocks outperform growth, but we follow hedge fund investor letters to understand where the markets and stocks might be going. That’s why we believe it would be worthwhile to take a look at the hedge fund sentiment on Pzena Investment Management Inc (NYSE:PZN) in order to identify whether reputable and successful top money managers continue to believe in its potential.
Pzena Investment Management Inc (NYSE:PZN) has experienced an increase in hedge fund sentiment recently. PZN was in 5 hedge funds’ portfolios at the end of December. There were 4 hedge funds in our database with PZN holdings at the end of the previous quarter. Our calculations also showed that PZN isn’t among the 30 most popular stocks among hedge funds.
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
We’re going to take a look at the recent hedge fund action surrounding Pzena Investment Management Inc (NYSE:PZN).
How have hedgies been trading Pzena Investment Management Inc (NYSE:PZN)?
At the end of the fourth quarter, a total of 5 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 25% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards PZN over the last 14 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Renaissance Technologies was the largest shareholder of Pzena Investment Management Inc (NYSE:PZN), with a stake worth $7.6 million reported as of the end of December. Trailing Renaissance Technologies was Royce & Associates, which amassed a stake valued at $6.3 million. GAMCO Investors, Millennium Management, and Citadel Investment Group were also very fond of the stock, giving the stock large weights in their portfolios.
With a general bullishness amongst the heavyweights, specific money managers have been driving this bullishness. Citadel Investment Group, managed by Ken Griffin, initiated the largest position in Pzena Investment Management Inc (NYSE:PZN). Citadel Investment Group had $0.1 million invested in the company at the end of the quarter.
Let’s also examine hedge fund activity in other stocks similar to Pzena Investment Management Inc (NYSE:PZN). These stocks are Conn’s, Inc. (NASDAQ:CONN), Cresud S.A.C.I.F. y A. (NASDAQ:CRESY), Urstadt Biddle Properties Inc. (NYSE:UBP), and Oaktree Specialty Lending Corporation (NASDAQ:OCSL). This group of stocks’ market caps match PZN’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CONN | 14 | 151488 | -5 |
| CRESY | 7 | 26789 | 2 |
| UBP | 2 | 11884 | 0 |
| OCSL | 12 | 55436 | -2 |
| Average | 8.75 | 61399 | -1.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 8.75 hedge funds with bullish positions and the average amount invested in these stocks was $61 million. That figure was $15 million in PZN’s case. Conn’s, Inc. (NASDAQ:CONN) is the most popular stock in this table. On the other hand Urstadt Biddle Properties Inc. (NYSE:UBP) is the least popular one with only 2 bullish hedge fund positions. Pzena Investment Management Inc (NYSE:PZN) 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 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. Unfortunately PZN wasn’t nearly as popular as these 15 stock (hedge fund sentiment was quite bearish); PZN investors were disappointed as the stock returned 13.6% and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 15 most popular stocks) among hedge funds as 13 of these stocks already outperformed the market this year.
Disclosure: None. This article was originally published at Insider Monkey.
