Is Powell Industries, Inc. (POWL) Going to Burn These Hedge Funds?

Before putting in our own effort and resources into finding a good investment, we can quickly utilize hedge fund expertise to give us a quick glimpse of whether that stock could make for a good addition to our portfolios. The odds are not exactly stacked in investors’ favor when it comes to beating the market, as evidenced by the fact that less than 49% of the stocks in the S&P 500 did so during the 12-month period ending October 30. However, 63% of hedge funds’ top 30 stock picks from the index did beat the market, and returned nearly twice as much on average as the index. Thus, we can see that the tireless research and efforts of hedge funds to identify winning stocks can work to our advantage when we know how to use the data. While not all of their picks will be winners, our odds are much better following their best stock picks than trying to go it alone.

Is Powell Industries, Inc. (NASDAQ:POWL) a buy, sell, or hold? The stock has plunged by 43% since the beginning of the year, but the number of funds with long positions in the company has inched up by 2 lately. POWL was in 10 hedge funds’ portfolios at the end of September. However, 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 Bank Mutual Corporation (NASDAQ:BKMU), One Liberty Properties, Inc. (NYSE:OLP), and Freshpet Inc (NASDAQ:FRPT) to gather more data points.

In the financial world there are a large number of gauges stock traders have at their disposal to assess publicly traded companies. A couple of the most under-the-radar gauges are hedge fund and insider trading activity. Our experts have shown that, historically, those who follow the top picks of the top fund managers can outpace their index-focused peers by a superb amount (see the details here).

With all of this in mind, let’s check out the new action encompassing Powell Industries, Inc. (NASDAQ:POWL).

What have hedge funds been doing with Powell Industries, Inc. (NASDAQ:POWL)?

At the end of the third quarter, a total of 10 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 25% from one quarter earlier. With hedgies’ positions undergoing their usual ebb and flow, there exists an “upper tier” 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, Rutabaga Capital Management, managed by Peter Schliemann, holds the most valuable position in Powell Industries, Inc. (NASDAQ:POWL). Rutabaga Capital Management has a $24.9 million position in the stock, comprising 3.1% of its 13F portfolio. Sitting at the No. 2 spot is Beddow Capital Management, managed by Ed Beddow and William Tichy, which holds a $8.6 million position; the fund has 3.6% of its 13F portfolio invested in the stock. Some other professional money managers that hold long positions contain Chuck Royce’s Royce & Associates, Ken Griffin’s Citadel Investment Group, and Jim Simons’ Renaissance Technologies.

As industrywide interest jumped, specific money managers were leading the bulls’ herd. Renaissance Technologies, established the most valuable position in Powell Industries, Inc. (NASDAQ:POWL). Renaissance Technologies had $1.3 million invested in the company at the end of the quarter. Chao Ku’s Nine Chapters Capital Management also made a $0.5 million investment in the stock during the quarter. The only other fund with a new position in the stock is Dmitry Balyasny’s Balyasny Asset Management.

Let’s now review hedge fund activity in other stocks similar to Powell Industries, Inc. (NASDAQ:POWL). We will take a look at Bank Mutual Corporation (NASDAQ:BKMU), One Liberty Properties, Inc. (NYSE:OLP), Freshpet Inc (NASDAQ:FRPT), and Guaranty Bancorp (NASDAQ:GBNK). This group of stocks’ market values match POWL’s market value.

As you can see these stocks had an average of 7 hedge funds with bullish positions and the average amount invested in these stocks was $29 million. That figure was $45 million in POWL’s case. Guaranty Bancorp (NASDAQ:GBNK) is the most popular stock in this table with a total of 10 funds reporting long positions. On the other hand Bank Mutual Corporation (NASDAQ:BKMU) is the least popular one. Powell Industries, Inc. (NASDAQ:POWL) registered the same level of popularity as GBNK, which may suggest that the stock is an interesting investment opportunity, but more research is required before buying shares.