Coronavirus is probably the #1 concern in investors’ minds right now. It should be. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW. We predicted that a US recession is imminent and US stocks will go down by at least 20% in the next 3-6 months. We also told you to short the market ETFs and buy long-term bonds. Investors who agreed with us and replicated these trades are up double digits whereas the market is down double digits. Our article also called for a total international travel ban to prevent the spread of the coronavirus especially from Europe. We were one step ahead of the markets and the president.
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the fourth quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 4 years and analyze what the smart money thinks of PNC Financial Services Group Inc. (NYSE:PNC) based on that data.
PNC Financial Services Group Inc. (NYSE:PNC) shares haven’t seen a lot of action during the fourth quarter. Overall, hedge fund sentiment was unchanged. The stock was in 42 hedge funds’ portfolios at the end of December. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Banco Santander, S.A. (NYSE:SAN), The Bank of Nova Scotia (NYSE:BNS), and Dominion Resources, Inc. (NYSE:D) to gather more data points. Our calculations also showed that PNC isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video below for Q3 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 monthly stock picks returned 72.9% since March 2017 and outperformed the S&P 500 ETFs by more than 41 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.
Warren Buffett of Berkshire Hathaway
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. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. In January, we recommended a long position in one of the most shorted stocks in the market, and that stock returned more than 50% despite the large losses in the market since our recommendation. With all of this in mind let’s take a look at the new hedge fund action surrounding PNC Financial Services Group Inc. (NYSE:PNC).
How are hedge funds trading PNC Financial Services Group Inc. (NYSE:PNC)?
Heading into the first quarter of 2020, a total of 42 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from one quarter earlier. On the other hand, there were a total of 38 hedge funds with a bullish position in PNC a year ago. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Berkshire Hathaway held the most valuable stake in PNC Financial Services Group Inc. (NYSE:PNC), which was worth $1384.2 million at the end of the third quarter. On the second spot was AQR Capital Management which amassed $155.9 million worth of shares. Balyasny Asset Management, Adage Capital Management, and GAMCO Investors 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 Prospector Partners allocated the biggest weight to PNC Financial Services Group Inc. (NYSE:PNC), around 2.77% of its 13F portfolio. Gillson Capital is also relatively very bullish on the stock, earmarking 2.7 percent of its 13F equity portfolio to PNC.
Because PNC Financial Services Group Inc. (NYSE:PNC) has experienced falling interest from the aggregate hedge fund industry, logic holds that there lies a certain “tier” of fund managers that elected to cut their full holdings in the third quarter. Interestingly, Clint Carlson’s Carlson Capital cut the biggest position of all the hedgies followed by Insider Monkey, worth an estimated $69.7 million in stock. Michael Kharitonov and Jon David McAuliffe’s fund, Voleon Capital, also sold off its stock, about $10 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as PNC Financial Services Group Inc. (NYSE:PNC) but similarly valued. We will take a look at Banco Santander, S.A. (NYSE:SAN), The Bank of Nova Scotia (NYSE:BNS), Dominion Resources, Inc. (NYSE:D), and Intuitive Surgical, Inc. (NASDAQ:ISRG). This group of stocks’ market caps match PNC’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| SAN | 21 | 637200 | 0 |
| BNS | 16 | 413736 | 0 |
| D | 37 | 773242 | -8 |
| ISRG | 51 | 1118443 | 6 |
| Average | 31.25 | 735655 | -0.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 31.25 hedge funds with bullish positions and the average amount invested in these stocks was $736 million. That figure was $2157 million in PNC’s case. Intuitive Surgical, Inc. (NASDAQ:ISRG) is the most popular stock in this table. On the other hand The Bank of Nova Scotia (NYSE:BNS) is the least popular one with only 16 bullish hedge fund positions. PNC Financial Services Group Inc. (NYSE:PNC) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 11.7% in 2020 through March 11th but beat the market by 3.1 percentage points. Unfortunately PNC wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on PNC were disappointed as the stock returned -35.7% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
Disclosure: None. This article was originally published at Insider Monkey.
