Is Potlatch Corporation (PCH) Worthy of Your Portfolio?

It is already common knowledge that individual investors do not usually have the necessary resources and abilities to properly research an investment opportunity. As a result, most investors pick their illusory “winners” by making a superficial analysis and research that leads to poor performance on aggregate. The Standard and Poor’s 500 Index returned 7.6% over the 12-month period ending November 21, while more than 51% of the constituents of the index underperformed the benchmark. Hence, a random stock picking process will most likely lead to disappointment. At the same time, the 30 most favored mid-cap stocks by the best performing hedge funds monitored by Insider Monkey generated a return of 18% over the same time span. Of course, hedge funds do make wrong bets on some occasions and these get disproportionately publicized on financial media, but piggybacking their moves can beat the broader market on average. That’s why we are going to go over recent hedge fund activity in Potlatch Corporation (NASDAQ:PCH).

Potlatch Corporation (NASDAQ:PCH) shareholders have witnessed an increase in hedge fund interest lately. Among the funds in our database, 12 funds held shares of the company at the end of September. 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 First Midwest Bancorp Inc (NASDAQ:FMBI), Heartland Express, Inc. (NASDAQ:HTLD), and Chico’s FAS, Inc. (NYSE:CHS) to gather more data points.

At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.

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Now, let’s check out the new action regarding Potlatch Corporation (NASDAQ:PCH).

What does the smart money think about Potlatch Corporation (NASDAQ:PCH)?

Heading into the fourth quarter of 2016, a total of 12 of the hedge funds tracked by Insider Monkey were bullish on this stock, up by one from the previous quarter. On the other hand, there were a total of 9 hedge funds with a bullish position in PCH at the beginning of this year. With hedge funds’ positions undergoing their usual ebb and flow, there exists a select group of noteworthy hedge fund managers who were upping their stakes considerably (or already accumulated large positions).

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Renaissance Technologies, one of the largest hedge funds in the world, has the largest position in Potlatch Corporation (NASDAQ:PCH), worth close to $54.9 million, comprising 0.1% of its total 13F portfolio. Coming in second is Millennium Management, led by Israel Englander, holding a $7 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Some other hedge funds and institutional investors that hold long positions encompass Ken Fisher’s Fisher Asset Management, Ira Unschuld’s Brant Point Investment Management and Ken Heebner’s Capital Growth Management. 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.

With a general bullishness amongst the heavyweights, key hedge funds were breaking ground themselves. Brant Point Investment Management, led by Ira Unschuld, initiated the largest position in Potlatch Corporation (NASDAQ:PCH). Brant Point Investment Management had $4.2 million invested in the company at the end of the quarter. Ken Heebner’s Capital Growth Management also initiated a $1.6 million position during the quarter.

Let’s check out hedge fund activity in other stocks similar to Potlatch Corporation (NASDAQ:PCH). These stocks are First Midwest Bancorp Inc (NASDAQ:FMBI), Heartland Express, Inc. (NASDAQ:HTLD), Chico’s FAS, Inc. (NYSE:CHS), and Flagstar Bancorp Inc (NYSE:FBC). All of these stocks’ market caps are similar to PCH’s market cap.

As you can see these stocks had an average of 14 funds with bullish positions and the average amount invested in these stocks was $99 million. That figure was $80 million in PCH’s case. Chico’s FAS, Inc. (NYSE:CHS) is the most popular stock in this table. On the other hand Flagstar Bancorp Inc (NYSE:FBC) is the least popular one with only 10 funds holding long positions. Potlatch Corporation (NASDAQ:PCH) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard CHS might be a better candidate to consider taking a long position in.

Disclosure: none