Is PNW Stock A Buy or Sell?

Hedge funds and large money managers usually invest with a focus on the long-term horizon and, therefore, short-lived dips or bumps on the charts usually don’t make them change their opinion towards a company. This time it may be different. The coronavirus pandemic destroyed the high correlations among major industries and asset classes. We are now in a stock pickers market where fundamentals of a stock have more effect on the price than the overall direction of the market. As a result we observe sudden and large changes in hedge fund positions depending on the news flow. Let’s take a look at the hedge fund sentiment towards Pinnacle West Capital Corporation (NYSE:PNW) to find out whether there were any major changes in hedge funds’ views.

Is PNW stock a buy? Pinnacle West Capital Corporation (NYSE:PNW) was in 24 hedge funds’ portfolios at the end of December. The all time high for this statistic is 27. PNW investors should be aware of an increase in activity from the world’s largest hedge funds recently. There were 22 hedge funds in our database with PNW holdings at the end of September. Our calculations also showed that PNW isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings).

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 197% since March 2017 and outperformed the S&P 500 ETFs by more than 124 percentage points (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Stuart Zimmer of Zimmer Partners

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, the CBD market is growing at a 33% annualized rate, so we are taking a closer look at this under-the-radar hemp stock. We go through lists like the 10 best biotech stocks under $10 to identify the next stock with 10x upside potential. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. Now we’re going to analyze the new hedge fund action surrounding Pinnacle West Capital Corporation (NYSE:PNW).

Do Hedge Funds Think PNW Is A Good Stock To Buy Now?

At the end of the fourth quarter, a total of 24 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 9% from the third quarter of 2020. The graph below displays the number of hedge funds with bullish position in PNW over the last 22 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Renaissance Technologies has the largest position in Pinnacle West Capital Corporation (NYSE:PNW), worth close to $111 million, corresponding to 0.1% of its total 13F portfolio. Coming in second is Zimmer Partners, led by Stuart J. Zimmer, holding a $66.6 million position; 1% of its 13F portfolio is allocated to the company. Some other members of the smart money with similar optimism consist of Cliff Asness’s AQR Capital Management, D. E. Shaw’s D E Shaw and Israel Englander’s Millennium Management. In terms of the portfolio weights assigned to each position Zimmer Partners allocated the biggest weight to Pinnacle West Capital Corporation (NYSE:PNW), around 0.98% of its 13F portfolio. Jones Road Capital Management is also relatively very bullish on the stock, setting aside 0.97 percent of its 13F equity portfolio to PNW.

As industrywide interest jumped, some big names have been driving this bullishness. Point72 Asset Management, managed by Steve Cohen, established the most valuable position in Pinnacle West Capital Corporation (NYSE:PNW). Point72 Asset Management had $8.4 million invested in the company at the end of the quarter. Paul Marshall and Ian Wace’s Marshall Wace LLP also initiated a $3.1 million position during the quarter. The other funds with brand new PNW positions are Aaron Wertentheil’s Jones Road Capital Management, Minhua Zhang’s Weld Capital Management, and Jinghua Yan’s TwinBeech Capital.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Pinnacle West Capital Corporation (NYSE:PNW) but similarly valued. We will take a look at WEX Inc (NYSE:WEX), Store Capital Corporation (NYSE:STOR), Neurocrine Biosciences, Inc. (NASDAQ:NBIX), Ascendis Pharma A/S (NASDAQ:ASND), AMERCO (NASDAQ:UHAL), RealPage, Inc. (NASDAQ:RP), and AptarGroup, Inc. (NYSE:ATR). This group of stocks’ market caps are closest to PNW’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 27 hedge funds with bullish positions and the average amount invested in these stocks was $1109 million. That figure was $331 million in PNW’s case. RealPage, Inc. (NASDAQ:RP) is the most popular stock in this table. On the other hand Store Capital Corporation (NYSE:STOR) is the least popular one with only 12 bullish hedge fund positions. Pinnacle West Capital Corporation (NYSE:PNW) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for PNW is 50.3. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks gained 12.3% in 2021 through April 19th and surpassed the market again by 0.9 percentage points. Unfortunately PNW wasn’t nearly as popular as these 30 stocks (hedge fund sentiment was quite bearish); PNW investors were disappointed as the stock returned 6.5% since the end of December (through 4/19) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 30 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.

Disclosure: None. This article was originally published at Insider Monkey.

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