We are still in an overall bull market and many stocks that smart money investors were piling into surged through the end of November. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 54% and 51% respectively. Hedge funds’ top 3 stock picks returned 41.7% this year and beat the S&P 500 ETFs by 14 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like Principal Financial Group Inc (NASDAQ:PFG).
Is Principal Financial Group Inc (NASDAQ:PFG) a buy, sell, or hold? Hedge funds are getting more optimistic. The number of bullish hedge fund positions improved by 2 lately. Our calculations also showed that PFG isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 27.8% through November 21, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Jeffrey Talpins of Element Capital
Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world’s most bearish hedge fund that’s more convinced than ever that a crash is coming, our long-short investment strategy doesn’t rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds‘ buy/sell signals. Let’s take a peek at the new hedge fund action regarding Principal Financial Group Inc (NASDAQ:PFG).
Hedge fund activity in Principal Financial Group Inc (NASDAQ:PFG)
Heading into the fourth quarter of 2019, a total of 19 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 12% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards PFG over the last 17 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Two Sigma Advisors was the largest shareholder of Principal Financial Group Inc (NASDAQ:PFG), with a stake worth $37 million reported as of the end of September. Trailing Two Sigma Advisors was GLG Partners, which amassed a stake valued at $16.8 million. Balyasny Asset Management, Impax Asset Management, and Citadel Investment Group 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 Signition LP allocated the biggest weight to Principal Financial Group Inc (NASDAQ:PFG), around 1.65% of its 13F portfolio. Qtron Investments is also relatively very bullish on the stock, dishing out 0.3 percent of its 13F equity portfolio to PFG.
As industrywide interest jumped, key hedge funds have jumped into Principal Financial Group Inc (NASDAQ:PFG) headfirst. Winton Capital Management, managed by David Harding, created the biggest position in Principal Financial Group Inc (NASDAQ:PFG). Winton Capital Management had $6.2 million invested in the company at the end of the quarter. Jeffrey Talpins’s Element Capital Management also initiated a $0.6 million position during the quarter. The other funds with new positions in the stock are Donald Sussman’s Paloma Partners, Matthew Tewksbury’s Stevens Capital Management, and Bruce Kovner’s Caxton Associates.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Principal Financial Group Inc (NASDAQ:PFG) but similarly valued. These stocks are Invitation Homes Inc. (NYSE:INVH), Citizens Financial Group Inc (NYSE:CFG), WPP plc (NYSE:WPP), and Regions Financial Corporation (NYSE:RF). This group of stocks’ market valuations are closest to PFG’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| INVH | 28 | 1096604 | -3 |
| CFG | 38 | 1571462 | -1 |
| WPP | 3 | 41384 | 0 |
| RF | 23 | 502597 | -9 |
| Average | 23 | 803012 | -3.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 23 hedge funds with bullish positions and the average amount invested in these stocks was $803 million. That figure was $99 million in PFG’s case. Citizens Financial Group Inc (NYSE:CFG) is the most popular stock in this table. On the other hand WPP plc (NYSE:WPP) is the least popular one with only 3 bullish hedge fund positions. Principal Financial Group Inc (NASDAQ:PFG) 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. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately PFG wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); PFG investors were disappointed as the stock returned -3.6% during the first two months of the fourth quarter 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 70 percent of these stocks already outperformed the market in Q4.
Disclosure: None. This article was originally published at Insider Monkey.
