World-class money managers like Bill Ackman and Barry Rosenstein only invest their wealthy clients’ money after undertaking a rigorous examination of any potential stock. They are particularly successful in this regard when it comes to small-cap stocks, which their peerless research gives them a big information advantage on when it comes to judging their worth. It’s not surprising then that they generate their biggest returns from these stocks and invest more of their money in these stocks on average than other investors. It’s also not surprising then that we pay close attention to these picks ourselves and have built a market-beating investment strategy around them.
Is Pinnacle West Capital Corporation (NYSE:PNW) a buy here? Investors who are in the know are becoming less hopeful. The number of long hedge fund positions went down by 6 in recent months. At the end of this article we will also compare PNW to other stocks including Aramark (NYSE:ARMK), DENTSPLY International Inc. (NASDAQ:XRAY), and The WhiteWave Foods Co (NYSE:WWAV) to get a better sense of its popularity.
Follow Pinnacle West Capital Corp (NYSE:PNW)
Follow Pinnacle West Capital Corp (NYSE:PNW)
Keeping this in mind, let’s take a look at the fresh action encompassing Pinnacle West Capital Corporation (NYSE:PNW).
What does the smart money think about Pinnacle West Capital Corporation (NYSE:PNW)?
Heading into Q4, a total of 18 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -25% from the previous quarter. With the smart money’s sentiment swirling, there exists an “upper tier” of noteworthy hedge fund managers who were upping their holdings significantly (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, AQR Capital Management, managed by Cliff Asness, holds the number one position in Pinnacle West Capital Corporation (NYSE:PNW). AQR Capital Management has an $148.7 million position in the stock, comprising 0.3% of its 13F portfolio. The second largest stake is held by Millennium Management, led by Israel Englander, holding a $82.6 million position; 0.2% of its 13F portfolio is allocated to the stock. Some other hedge funds and institutional investors that are bullish encompass Phill Gross and Robert Atchinson’s Adage Capital Management, Jim Simons’ Renaissance Technologies and Dmitry Balyasny’s Balyasny Asset Management.
Seeing as Pinnacle West Capital Corporation (NYSE:PNW) has witnessed bearish sentiment from hedge fund managers, logic holds that there were a few money managers that slashed their entire stakes by the end of the third quarter. Intriguingly, Jonathan Barrett and Paul Segal’s Luminus Management dumped the largest investment of the 700 funds monitored by Insider Monkey, comprising an estimated $15 million in stock. David Harding’s fund, Winton Capital Management, also said goodbye to its stock, about $10.9 million worth. These moves are intriguing to say the least, as total hedge fund interest dropped by 6 funds by the end of the third quarter.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Pinnacle West Capital Corporation (NYSE:PNW) but similarly valued. These stocks are Aramark (NYSE:ARMK), DENTSPLY International Inc. (NASDAQ:XRAY), The WhiteWave Foods Co (NYSE:WWAV), and Torchmark Corporation (NYSE:TMK). All of these stocks’ market caps match PNW’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| ARMK | 53 | 2684913 | 12 |
| XRAY | 29 | 807345 | 8 |
| WWAV | 33 | 690741 | 3 |
| TMK | 24 | 547957 | 10 |
As you can see these stocks had an average of 34.75 hedge funds with bullish positions and the average amount invested in these stocks was $1183 million. That figure was $424 million in PNW’s case. Aramark (NYSE:ARMK) is the most popular stock in this table. On the other hand Torchmark Corporation (NYSE:TMK) is the least popular one with only 24 bullish hedge fund positions. Compared to these stocks Pinnacle West Capital Corporation (NYSE:PNW) is even less popular than TMK. 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.
