Looking for high-potential stocks? Just follow the big players within the hedge fund industry. Why should you do so? Let’s take a brief look at what statistics have to say about hedge funds’ stock picking abilities to illustrate. The Standard and Poor’s 500 Index returned approximately 7.6% in the 12 months ending November 21, with more than 51% of the stocks in the index failing to beat the benchmark. Therefore, the odds that one will pin down a winner by randomly picking a stock are less than the odds in a fair coin-tossing game. Conversely, best performing hedge funds’ 30 preferred mid-cap stocks generated a return of 18% during the same 12-month period. Coincidence? It might happen to be so, but it is unlikely. Our research covering a 17-year period indicates that hedge funds’ stock picks generate superior risk-adjusted returns. That’s why we believe it is wise to check hedge fund activity before you invest your time or your savings on a stock like Petrobras Argentina SA ADR (NYSE:PZE).
Petrobras Argentina SA ADR (NYSE:PZE) shareholders have witnessed a decrease in support from the world’s most successful money managers recently. There were 8 hedge funds in our database with PZE holdings at the end of September. At the end of this article we will also compare PZE to other stocks including Barracuda Networks Inc (NYSE:CUDA), The E.W. Scripps Company (NYSE:SSP), and SUPERVALU INC. (NYSE:SVU) to get a better sense of its popularity.
Follow Petrobras Energia S A (NYSE:PZE)
Follow Petrobras Energia S A (NYSE:PZE)
We care about hedge fund sentiment because historically hedge funds’ stock picks delivered strong risk adjusted returns. There are certain segments of the market where hedge funds’ stock picks performed much better than its benchmarks. For instance, the 30 most popular mid-cap stocks among the best performing hedge funds returned 18% over the last 12 months outpacing S&P 500 Index by more than 10 percentage points. We developed this strategy 2.5 years ago and started sharing its picks in our quarterly newsletter. It bested the S&P 500 Index ETFs by delivering a solid 39% vs. 22% gain for its benchmarks.
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Hedge fund activity in Petrobras Argentina SA ADR (NYSE:PZE)
Heading into the fourth quarter of 2016, a total of 8 of the hedge funds tracked by Insider Monkey held long positions in this stock, down by 11% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in PZE over the last 5 quarters. With hedgies’ sentiment swirling, there exists a select group of notable hedge fund managers who were boosting their holdings meaningfully (or already accumulated large positions).
According to Insider Monkey’s hedge fund database, Point State Capital, led by Zach Schreiber, holds the biggest position in Petrobras Argentina SA ADR (NYSE:PZE). Point State Capital has a $4.1 million position in the stock. Coming in second is Renaissance Technologies, one of the largest hedge funds in the world, with a $2.5 million position. Other peers that are bullish encompass Jonathan Kolatch’s Redwood Capital Management, Israel Englander’s Millennium Management and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.
We already know that not all hedge funds are bullish on the stock and some hedge funds actually dumped their positions entirely. It’s worth mentioning that Satyen Mehta’s Neon Liberty Capital Management dumped the biggest investment of the 700 funds tracked by Insider Monkey, totaling an estimated $12.1 million in stock, and Matthew Tewksbury’s Stevens Capital Management was right behind this move, as the fund said goodbye to about $0.1 million worth of shares.
Let’s go over hedge fund activity in other stocks similar to Petrobras Argentina SA ADR (NYSE:PZE). These stocks are Barracuda Networks Inc (NYSE:CUDA), The E.W. Scripps Company (NYSE:SSP), SUPERVALU INC. (NYSE:SVU), and Neenah Paper, Inc. (NYSE:NP). This group of stocks’ market caps match PZE’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CUDA | 16 | 55788 | 4 |
| SSP | 10 | 175000 | 2 |
| SVU | 31 | 324342 | 3 |
| NP | 10 | 94224 | 3 |
As you can see these stocks had an average of 17 hedge funds with bullish positions and the average amount invested in these stocks was $162 million. That figure was $11 million in PZE’s case. SUPERVALU INC. (NYSE:SVU) is the most popular stock in this table. On the other hand The E.W. Scripps Company (NYSE:SSP) is the least popular one with only 10 bullish hedge fund positions. Compared to these stocks Petrobras Argentina SA ADR (NYSE:PZE) is even less popular than SSP. Considering that hedge funds aren’t fond of this stock in relation to other companies analyzed in this article, it may be a good idea to analyze it in detail and understand why the smart money isn’t behind this stock. This isn’t necessarily bad news. Although it is possible that hedge funds may think the stock is overpriced and view the stock as a short candidate, they may not be very familiar with the bullish thesis. In either case more research is warranted.
Disclosure: None
