It is already common knowledge that individual investors do not usually have the necessary resources and abilities to properly research an investment opportunity. As a result, most investors pick their illusory “winners” by making a superficial analysis and research that leads to poor performance on aggregate. Since stock returns aren’t usually symmetrically distributed and index returns are more affected by a few outlier stocks (i.e. the FAANG stocks dominating and driving S&P 500 Index’s returns in recent years), more than 50% of the constituents of the Standard and Poor’s 500 Index underperform the benchmark. Hence, if you randomly pick a stock, there is more than 50% chance that you’d fail to beat the market. At the same time, the 30 most favored S&P 500 stocks by the hedge funds monitored by Insider Monkey generated a return of 15.1% over the last 12 months (vs. 5.6% gain for SPY), with 53% of these stocks outperforming the benchmark. Of course, hedge funds do make wrong bets on some occasions and these get disproportionately publicized on financial media, but piggybacking their moves can beat the broader market on average. That’s why we are going to go over recent hedge fund activity in PacWest Bancorp (NASDAQ:PACW).
Is PacWest Bancorp (NASDAQ:PACW) a buy, sell, or hold? Hedge funds are getting more optimistic. The number of bullish hedge fund positions inched up by 3 in recent months. Our calculations also showed that pacw isn’t among the 30 most popular stocks among hedge funds.
In the eyes of most shareholders, hedge funds are seen as slow, old financial vehicles of the past. While there are over 8,000 funds in operation at present, Our researchers choose to focus on the aristocrats of this club, approximately 700 funds. These investment experts preside over the majority of the smart money’s total asset base, and by following their best stock picks, Insider Monkey has discovered a number of investment strategies that have historically exceeded Mr. Market. Insider Monkey’s flagship hedge fund strategy outperformed the S&P 500 index by 6 percentage points per annum since its inception in May 2014 through early November 2018. We were able to generate large returns even by identifying short candidates. Our portfolio of short stocks lost 24% since February 2017 (through December 3rd) even though the market was up nearly 23% during the same period. We just shared a list of 11 short targets in our latest quarterly update.
We’re going to go over the key hedge fund action encompassing PacWest Bancorp (NASDAQ:PACW).
How are hedge funds trading PacWest Bancorp (NASDAQ:PACW)?
Heading into the fourth quarter of 2018, a total of 26 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 13% from the second quarter of 2018. The graph below displays the number of hedge funds with bullish position in PACW over the last 13 quarters. With hedge funds’ sentiment swirling, there exists a select group of noteworthy hedge fund managers who were upping their stakes meaningfully (or already accumulated large positions).
More specifically, Cardinal Capital was the largest shareholder of PacWest Bancorp (NASDAQ:PACW), with a stake worth $88.8 million reported as of the end of September. Trailing Cardinal Capital was Fisher Asset Management, which amassed a stake valued at $40.5 million. D E Shaw, Basswood Capital, and Millennium Management were also very fond of the stock, giving the stock large weights in their portfolios.
As aggregate interest increased, specific money managers have jumped into PacWest Bancorp (NASDAQ:PACW) headfirst. Highbridge Capital Management, managed by Glenn Russell Dubin, assembled the biggest position in PacWest Bancorp (NASDAQ:PACW). Highbridge Capital Management had $5.9 million invested in the company at the end of the quarter. Malcolm Fairbairn’s Ascend Capital also initiated a $0.9 million position during the quarter. The following funds were also among the new PACW investors: David Costen Haley’s HBK Investments, Paul Marshall and Ian Wace’s Marshall Wace LLP, and Jeffrey Talpins’s Element Capital Management.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as PacWest Bancorp (NASDAQ:PACW) but similarly valued. These stocks are Healthequity Inc (NASDAQ:HQY), Hexcel Corporation (NYSE:HXL), Six Flags Entertainment Corp (NYSE:SIX), and Crane Co. (NYSE:CR). This group of stocks’ market values resemble PACW’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| HQY | 15 | 63417 | -2 |
| HXL | 23 | 222789 | 9 |
| SIX | 25 | 733870 | 9 |
| CR | 19 | 348653 | 0 |
| Average | 20.5 | 342182 | 4 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 20.5 hedge funds with bullish positions and the average amount invested in these stocks was $342 million. That figure was $254 million in PACW’s case. Six Flags Entertainment Corp (NYSE:SIX) is the most popular stock in this table. On the other hand Healthequity Inc (NASDAQ:HQY) is the least popular one with only 15 bullish hedge fund positions. Compared to these stocks PacWest Bancorp (NASDAQ:PACW) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.
Disclosure: None. This article was originally published at Insider Monkey.
