We can judge whether PPL Corporation (NYSE:PPL) is a good investment right now by following the lead of some of the best investors in the world and piggybacking their ideas. There’s no better way to get these firms’ immense resources and analytical capabilities working for us than to follow their lead into their best ideas. While not all of these picks will be winners, research shows that these picks historically outperformed the market when we factor in known risk factors.
PPL Corporation (NYSE:PPL) shares haven’t seen a lot of action during the third quarter. Overall, hedge fund sentiment was unchanged. The stock was in 24 hedge funds’ portfolios at the end of the third quarter of 2018. At the end of this article we will also compare PPL to other stocks including Devon Energy Corp (NYSE:DVN), Xilinx, Inc. (NASDAQ:XLNX), and Energy Transfer Equity, L.P. (NYSE:ETE) to get a better sense of its popularity.
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 market by 18 percentage points since May 2014 through December 3, 2018 (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 24% through December 3, 2018. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Let’s view the new hedge fund action surrounding PPL Corporation (NYSE:PPL).
What have hedge funds been doing with PPL Corporation (NYSE:PPL)?
At Q3’s end, a total of 24 of the hedge funds tracked by Insider Monkey were bullish on this stock, no change from the previous quarter. The graph below displays the number of hedge funds with bullish position in PPL over the last 13 quarters. With hedge funds’ capital changing hands, there exists an “upper tier” of key hedge fund managers who were upping their stakes significantly (or already accumulated large positions).
The largest stake in PPL Corporation (NYSE:PPL) was held by Zimmer Partners, which reported holding $659.3 million worth of stock at the end of September. It was followed by Millennium Management with a $92.2 million position. Other investors bullish on the company included Luminus Management, Citadel Investment Group, and Blackstart Capital.
Seeing as PPL Corporation (NYSE:PPL) has witnessed bearish sentiment from the smart money, it’s easy to see that there exists a select few fund managers that slashed their positions entirely in the third quarter. It’s worth mentioning that Zach Schreiber’s Point State Capital said goodbye to the largest investment of the 700 funds tracked by Insider Monkey, valued at about $49.6 million in stock, and Josh Donfeld and David Rogers’s Castle Hook Partners was right behind this move, as the fund cut about $20.2 million worth. These moves are interesting, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s check out hedge fund activity in other stocks similar to PPL Corporation (NYSE:PPL). These stocks are Devon Energy Corp (NYSE:DVN), Xilinx, Inc. (NASDAQ:XLNX), Energy Transfer Equity, L.P. (NYSE:ETE), and ABIOMED, Inc. (NASDAQ:ABMD). This group of stocks’ market caps are similar to PPL’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| DVN | 47 | 1545079 | 1 |
| XLNX | 36 | 1523679 | 8 |
| ETE | 22 | 400005 | 6 |
| ABMD | 22 | 1750748 | -2 |
| Average | 31.75 | 1304878 | 3.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 31.75 hedge funds with bullish positions and the average amount invested in these stocks was $1.31 billion. That figure was $937 million in PPL’s case. Devon Energy Corp (NYSE:DVN) is the most popular stock in this table. On the other hand Energy Transfer Equity, L.P. (NYSE:ETE) is the least popular one with only 22 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. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard DVN might be a better candidate to consider a long position.
Disclosure: None. This article was originally published at Insider Monkey.
