How do you pick the next stock to invest in? One way would be to spend days of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don’t always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding PPL Corporation (NYSE:PPL).
PPL Corporation (NYSE:PPL) investors should be aware of a decrease in hedge fund sentiment in recent months. PPL Corporation (NYSE:PPL) was in 23 hedge funds’ portfolios at the end of June. The all time high for this statistic is 32. Our calculations also showed that PPL isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).
In today’s marketplace there are many signals stock traders use to grade publicly traded companies. A couple of the less utilized signals are hedge fund and insider trading signals. Our experts have shown that, historically, those who follow the top picks of the elite fund managers can outclass their index-focused peers by a significant margin (see the details here). Also, our monthly newsletter’s portfolio of long stock picks returned 185.4% since March 2017 (through August 2021) and beat the S&P 500 Index by more than 79 percentage points. You can download a sample issue of this newsletter on our website.
John Overdeck of Two Sigma Advisors
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. 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 homepage. With all of this in mind let’s take a look at the key hedge fund action surrounding PPL Corporation (NYSE:PPL).
Do Hedge Funds Think PPL Is A Good Stock To Buy Now?
At the end of the second quarter, a total of 23 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -8% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards PPL over the last 24 quarters. With the smart money’s capital changing hands, there exists an “upper tier” of notable hedge fund managers who were upping their stakes considerably (or already accumulated large positions).
More specifically, Citadel Investment Group was the largest shareholder of PPL Corporation (NYSE:PPL), with a stake worth $97.2 million reported as of the end of June. Trailing Citadel Investment Group was Renaissance Technologies, which amassed a stake valued at $88 million. Millennium Management, Two Sigma Advisors, and Adage Capital Management 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 Coann Capital allocated the biggest weight to PPL Corporation (NYSE:PPL), around 6.33% of its 13F portfolio. GRT Capital Partners is also relatively very bullish on the stock, earmarking 0.53 percent of its 13F equity portfolio to PPL.
Judging by the fact that PPL Corporation (NYSE:PPL) has experienced a decline in interest from the smart money, logic holds that there were a few money managers who were dropping their entire stakes last quarter. Intriguingly, Benjamin A. Smith’s Laurion Capital Management cut the biggest position of the “upper crust” of funds followed by Insider Monkey, totaling close to $6 million in stock. Ryan Tolkin (CIO)’s fund, Schonfeld Strategic Advisors, also said goodbye to its stock, about $2.4 million worth. These transactions are interesting, as total hedge fund interest dropped by 2 funds last quarter.
Let’s go over hedge fund activity in other stocks similar to PPL Corporation (NYSE:PPL). These stocks are 10x Genomics, Inc. (NASDAQ:TXG), Perusahaan Perseroan (Persero) PT Telekomunikasi Indonesia Tbk (NYSE:TLK), Tractor Supply Company (NASDAQ:TSCO), Burlington Stores Inc (NYSE:BURL), Cheniere Energy Partners LP (NYSE:CQP), Ventas, Inc. (NYSE:VTR), and Expeditors International of Washington, Inc. (NASDAQ:EXPD). This group of stocks’ market values are closest to PPL’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| TXG | 28 | 1447446 | 5 |
| TLK | 5 | 108737 | 1 |
| TSCO | 38 | 1374315 | 9 |
| BURL | 43 | 1690108 | 11 |
| CQP | 2 | 4279 | 0 |
| VTR | 25 | 562555 | -2 |
| EXPD | 29 | 498402 | 8 |
| Average | 24.3 | 812263 | 4.6 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 24.3 hedge funds with bullish positions and the average amount invested in these stocks was $812 million. That figure was $418 million in PPL’s case. Burlington Stores Inc (NYSE:BURL) is the most popular stock in this table. On the other hand Cheniere Energy Partners LP (NYSE:CQP) is the least popular one with only 2 bullish hedge fund positions. PPL Corporation (NYSE:PPL) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for PPL is 50.2. 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. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 24% in 2021 through October 22nd and still beat the market by 1.6 percentage points. A small number of hedge funds were also right about betting on PPL as the stock returned 5.6% since the end of the second quarter (through 10/22) and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.
