PacWest Bancorp (PACW): Are Hedge Funds Right About This Stock?

Is PacWest Bancorp (NASDAQ:PACW) a buy, sell, or hold? The smart money is taking a bearish view. The number of bullish hedge fund positions dropped by 3 in recent months.

In the eyes of most investors, hedge funds are seen as slow, old investment vehicles of years past. While there are more than 8000 funds trading at present, we at Insider Monkey hone in on the moguls of this club, around 450 funds. Most estimates calculate that this group controls most of all hedge funds’ total capital, and by keeping an eye on their highest performing picks, we have unearthed a few investment strategies that have historically outpaced Mr. Market. Our small-cap hedge fund strategy beat the S&P 500 index by 18 percentage points per annum for a decade in our back tests, and since we’ve started sharing our picks with our subscribers at the end of August 2012, we have outperformed the S&P 500 index by 23.3 percentage points in 8 months (check out a sample of our picks).

Just as important, bullish insider trading sentiment is a second way to parse down the investments you’re interested in. As the old adage goes: there are many incentives for a bullish insider to sell shares of his or her company, but just one, very obvious reason why they would buy. Many academic studies have demonstrated the valuable potential of this tactic if shareholders understand what to do (learn more here).

Now, it’s important to take a peek at the recent action regarding PacWest Bancorp (NASDAQ:PACW).

How have hedgies been trading PacWest Bancorp (NASDAQ:PACW)?

Heading into Q2, a total of 8 of the hedge funds we track were bullish in this stock, a change of -27% from the previous quarter. With hedge funds’ capital changing hands, there exists a few notable hedge fund managers who were increasing their stakes significantly.

According to our comprehensive database, AQR Capital Management, managed by Cliff Asness, holds the most valuable position in PacWest Bancorp (NASDAQ:PACW). AQR Capital Management has a $7.8 million position in the stock, comprising less than 0.1%% of its 13F portfolio. The second largest stake is held by Daniel Lascano of Lomas Capital Management, with a $4.7 million position; 1.5% of its 13F portfolio is allocated to the stock. Other hedgies that are bullish include Jim Simons’s Renaissance Technologies, Ken Griffin’s Citadel Investment Group and D. E. Shaw’s D E Shaw.

Since PacWest Bancorp (NASDAQ:PACW) has experienced declining sentiment from hedge fund managers, it’s easy to see that there exists a select few funds who were dropping their positions entirely in Q1. Intriguingly, John Brennan’s Sirios Capital Management sold off the largest position of the “upper crust” of funds we track, worth an estimated $5.8 million in stock., and Dmitry Balyasny of Balyasny Asset Management was right behind this move, as the fund said goodbye to about $1.2 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest fell by 3 funds in Q1.

Insider trading activity in PacWest Bancorp (NASDAQ:PACW)

Insider trading activity, especially when it’s bullish, is best served when the company in question has seen transactions within the past six months. Over the latest 180-day time frame, PacWest Bancorp (NASDAQ:PACW) has seen zero unique insiders purchasing, and 2 insider sales (see the details of insider trades here).

Let’s go over hedge fund and insider activity in other stocks similar to PacWest Bancorp (NASDAQ:PACW). These stocks are First Interstate Bancsystem Inc (NASDAQ:FIBK), WestAmerica Bancorp. (NASDAQ:WABC), Western Alliance Bancorporation (NYSE:WAL), CVB Financial Corp. (NASDAQ:CVBF), and BBCN Bancorp, Inc. (NASDAQ:BBCN). All of these stocks are in the regional – pacific banks industry and their market caps are similar to PACW’s market cap.

With the results exhibited by the aforementioned time-tested strategies, retail investors should always monitor hedge fund and insider trading activity, and PacWest Bancorp (NASDAQ:PACW) applies perfectly to this mantra.

Click here to learn why you should track hedge funds