Legendary investors such as Leon Cooperman and Seth Klarman earn enormous amounts of money for themselves and their investors by doing in-depth research on small-cap stocks that big brokerage houses don’t publish. Small cap stocks -especially when they are screened well- can generate substantial outperformance versus a boring index fund. That’s why we analyze the activity of those successful funds in these small-cap stocks. In the following paragraphs, we analyze Powell Industries, Inc. (NASDAQ:POWL) from the perspective of those successful funds.
In Powell Industries, Inc. (NASDAQ:POWL)’s case it looks like hedge funds are in a bullish mood. More specifically, the number of funds from our database long the stock went up by three during the third quarter. However, the level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. 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 Iconix Brand Group Inc (NASDAQ:ICON), Ocwen Financial Corporation (NYSE:OCN), and Boulevard Acquisition Corp II (NASDAQ:BLVD) to gather more data points.
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At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.
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Now, let’s take a gander at the latest action surrounding 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 14 of the hedge funds tracked by Insider Monkey held long positions in Powell Industries, up from 11 funds at the end of June. By comparison, 11 hedge funds held shares or bullish call options in POWL heading into this year. With hedge funds’ sentiment swirling, there exists a few notable hedge fund managers who were boosting their holdings meaningfully (or already accumulated large positions).
According to Insider Monkey’s hedge fund database, Peter Schliemann’s Rutabaga Capital Management has the largest position in Powell Industries, Inc. (NASDAQ:POWL), worth close to $12.6 million, amounting to 2.5% of its total 13F portfolio. The second most bullish fund is Ed Beddow and William Tichy’s Beddow Capital Management, which holds a $11 million position; the fund has 4.5% of its 13F portfolio invested in the stock. Other hedge funds and institutional investors that are bullish contain Jim Simons’s Renaissance Technologies, Chuck Royce’s Royce & Associates, and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.
As one would reasonably expect, key hedge funds have been driving this bullishness. Beddow Capital Management assembled the largest position in Powell Industries, Inc. (NASDAQ:POWL). One of the biggest hedge funds in the world, Millennium Management, also initiated a $1.9 million position during the quarter. The other funds with brand new POWL positions are Neil Chriss’s Hutchin Hill Capital, Joel Greenblatt’s Gotham Asset Management, and Robert B. Gillam’s McKinley Capital Management.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Powell Industries, Inc. (NASDAQ:POWL) but similarly valued. These stocks are Iconix Brand Group Inc (NASDAQ:ICON), Ocwen Financial Corporation (NYSE:OCN), Boulevard Acquisition Corp II (NASDAQ:BLVD), and Catchmark Timber Trust Inc (NYSE:CTT). This group of stocks’ market caps match POWL’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| ICON | 11 | 75907 | -4 |
| OCN | 17 | 62994 | 1 |
| BLVD | 11 | 146114 | 0 |
| CTT | 13 | 34095 | 2 |
As you can see these stocks had an average of 13 funds with bullish positions and the average amount invested in these stocks was $80 million, versus $50 million in POWL’s case. Ocwen Financial Corporation (NYSE:OCN) is the most popular stock in this table. On the other hand Iconix Brand Group Inc (NASDAQ:ICON) is the least popular one with only 11 funds having reported long positions. Powell Industries, Inc. (NASDAQ:POWL) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. In this regard Ocwen Financial Corporation (NYSE:OCN) might be a better candidate to consider taking a long position in.
Disclosure: none
