Penske Automotive Group, Inc. (PAG): Hedge Funds Are Done Selling

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 Penske Automotive Group, Inc. (NYSE:PAG).

Penske Automotive Group, Inc. (NYSE:PAG) was in 19 hedge funds’ portfolios at the end of June. The all time high for this statistic is 29. PAG has seen an increase in support from the world’s most elite money managers recently. There were 12 hedge funds in our database with PAG positions at the end of the first quarter. Our calculations also showed that PAG isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 79 percentage points since March 2017 (see the details here). That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Ken Heebner of Capital Growth Management

Now let’s check out the new hedge fund action surrounding Penske Automotive Group, Inc. (NYSE:PAG).

Do Hedge Funds Think PAG Is A Good Stock To Buy Now?

At the end of the second quarter, a total of 19 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 58% from the previous quarter. The graph below displays the number of hedge funds with bullish position in PAG over the last 24 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.

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Cliff Asness’s AQR Capital Management has the largest position in Penske Automotive Group, Inc. (NYSE:PAG), worth close to $47.4 million, amounting to 0.1% of its total 13F portfolio. On AQR Capital Management’s heels is Peter Rathjens, Bruce Clarke and John Campbell of Arrowstreet Capital, with a $40 million position; less than 0.1%% of its 13F portfolio is allocated to the stock. Some other professional money managers that are bullish contain Mario Gabelli’s GAMCO Investors, Ken Griffin’s Citadel Investment Group and Murray Stahl’s Horizon Asset Management. In terms of the portfolio weights assigned to each position Horizon Asset Management allocated the biggest weight to Penske Automotive Group, Inc. (NYSE:PAG), around 0.39% of its 13F portfolio. GAMCO Investors is also relatively very bullish on the stock, earmarking 0.32 percent of its 13F equity portfolio to PAG.

With a general bullishness amongst the heavyweights, key money managers were leading the bulls’ herd. Capital Growth Management, managed by Ken Heebner, created the largest position in Penske Automotive Group, Inc. (NYSE:PAG). Capital Growth Management had $1.5 million invested in the company at the end of the quarter. Paul Tudor Jones’s Tudor Investment Corp also initiated a $1.1 million position during the quarter. The other funds with new positions in the stock are Jinghua Yan’s TwinBeech Capital, Noam Gottesman’s GLG Partners, and Greg Eisner’s Engineers Gate Manager.

Let’s now review hedge fund activity in other stocks similar to Penske Automotive Group, Inc. (NYSE:PAG). These stocks are Tandem Diabetes Care Inc (NASDAQ:TNDM), Landstar System, Inc. (NASDAQ:LSTR), Ingredion Incorporated (NYSE:INGR), CDK Global Inc (NASDAQ:CDK), Popular Inc (NASDAQ:BPOP), Primerica, Inc. (NYSE:PRI), and BOK Financial Corporation (NASDAQ:BOKF). This group of stocks’ market values are closest to PAG’s market value.

View table here if you experience formatting issues.

As you can see these stocks had an average of 22.7 hedge funds with bullish positions and the average amount invested in these stocks was $412 million. That figure was $188 million in PAG’s case. Popular Inc (NASDAQ:BPOP) is the most popular stock in this table. On the other hand BOK Financial Corporation (NASDAQ:BOKF) is the least popular one with only 13 bullish hedge fund positions. Penske Automotive Group, Inc. (NYSE:PAG) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for PAG is 44.7. 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 PAG as the stock returned 49% 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.