How do we determine whether Penske Automotive Group, Inc. (NYSE:PAG) makes for a good investment at the moment? We analyze the sentiment of a select group of the very best investors in the world, who spend immense amounts of time and resources studying companies. They may not always be right (no one is), but data shows that their consensus long positions have historically outperformed the market when we adjust for known risk factors.
Penske Automotive Group, Inc. (NYSE:PAG) investors should pay attention to a decrease in hedge fund interest lately. PAG was in 16 hedge funds’ portfolios at the end of September. There were 17 hedge funds in our database with PAG positions at the end of the previous quarter. Our calculations also showed that PAG isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
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 flagship best performing hedge funds strategy returned 91% since May 2014 and outperformed the Russell 2000 ETFs by nearly 40 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
David Harding of Winton Capital Management
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds‘ buy/sell signals. We’re going to take a gander at the fresh hedge fund action encompassing Penske Automotive Group, Inc. (NYSE:PAG).
What does smart money think about Penske Automotive Group, Inc. (NYSE:PAG)?
At the end of the third quarter, a total of 16 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -6% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards PAG over the last 17 quarters. With the smart money’s positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were upping their stakes considerably (or already accumulated large positions).
Among these funds, GAMCO Investors held the most valuable stake in Penske Automotive Group, Inc. (NYSE:PAG), which was worth $24.3 million at the end of the third quarter. On the second spot was AQR Capital Management which amassed $10.5 million worth of shares. Citadel Investment Group, Winton Capital Management, and Arrowstreet Capital 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 Zebra Capital Management allocated the biggest weight to Penske Automotive Group, Inc. (NYSE:PAG), around 0.27% of its 13F portfolio. GAMCO Investors is also relatively very bullish on the stock, setting aside 0.2 percent of its 13F equity portfolio to PAG.
Seeing as Penske Automotive Group, Inc. (NYSE:PAG) has witnessed bearish sentiment from the entirety of the hedge funds we track, it’s safe to say that there exists a select few fund managers that elected to cut their full holdings by the end of the third quarter. Interestingly, Chuck Royce’s Royce & Associates dropped the biggest stake of the 750 funds watched by Insider Monkey, worth about $4.4 million in stock. Perella Weinberg Partners, also sold off its stock, about $0.6 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest was cut by 1 funds by the end of the third quarter.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Penske Automotive Group, Inc. (NYSE:PAG) but similarly valued. We will take a look at Compania de Minas Buenaventura S.A.A. (NYSE:BVN), United Bankshares, Inc. (NASDAQ:UBSI), Echostar Corporation (NASDAQ:SATS), and Schneider National, Inc. (NYSE:SNDR). This group of stocks’ market caps are closest to PAG’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| BVN | 6 | 14159 | -1 |
| UBSI | 10 | 24052 | -4 |
| SATS | 29 | 601864 | 1 |
| SNDR | 17 | 127932 | -4 |
| Average | 15.5 | 192002 | -2 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 15.5 hedge funds with bullish positions and the average amount invested in these stocks was $192 million. That figure was $64 million in PAG’s case. Echostar Corporation (NASDAQ:SATS) is the most popular stock in this table. On the other hand Compania de Minas Buenaventura S.A.A. (NYSE:BVN) is the least popular one with only 6 bullish hedge fund positions. Penske Automotive Group, Inc. (NYSE:PAG) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Hedge funds were also right about betting on PAG, though not to the same extent, as the stock returned 7.6% during the first two months of the fourth quarter and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.
