The financial regulations require hedge funds and wealthy investors that exceeded the $100 million equity holdings threshold to file a report that shows their positions at the end of every quarter. Even though it isn’t the intention, these filings to a certain extent level the playing field for ordinary investors. The latest round of 13F filings disclosed the funds’ positions on March 31st, about a week after the S&P 500 Index bottomed. We at Insider Monkey have made an extensive database of more than 821 of those established hedge funds and famous value investors’ filings. In this article, we analyze how these elite funds and prominent investors traded Quanta Services Inc (NYSE:PWR) based on those filings.
Quanta Services Inc (NYSE:PWR) shareholders have witnessed a decrease in hedge fund interest of late. PWR was in 28 hedge funds’ portfolios at the end of March. There were 44 hedge funds in our database with PWR positions at the end of the previous quarter. Our calculations also showed that PWR isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).
Video: Watch our video about the top 5 most popular hedge fund stocks.
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 58 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
William Harnisch of Peconic Partners LLC
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out trades like this one as well as this tiny lithium play. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now let’s check out the fresh hedge fund action regarding Quanta Services Inc (NYSE:PWR).
How have hedgies been trading Quanta Services Inc (NYSE:PWR)?
At Q1’s end, a total of 28 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -36% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in PWR over the last 18 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Southport Management was the largest shareholder of Quanta Services Inc (NYSE:PWR), with a stake worth $951.9 million reported as of the end of September. Trailing Southport Management was Peconic Partners LLC, which amassed a stake valued at $172.7 million. Lyrical Asset Management, AQR Capital Management, and D E Shaw 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 Peconic Partners LLC allocated the biggest weight to Quanta Services Inc (NYSE:PWR), around 66.77% of its 13F portfolio. Brightlight Capital is also relatively very bullish on the stock, designating 11.73 percent of its 13F equity portfolio to PWR.
Seeing as Quanta Services Inc (NYSE:PWR) has experienced declining sentiment from the smart money, we can see that there is a sect of fund managers who were dropping their positions entirely by the end of the first quarter. It’s worth mentioning that Louis Bacon’s Moore Global Investments sold off the largest investment of the 750 funds followed by Insider Monkey, totaling about $7.7 million in stock. Ken Heebner’s fund, Capital Growth Management, also cut its stock, about $5.1 million worth. These moves are important to note, as total hedge fund interest dropped by 16 funds by the end of the first quarter.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Quanta Services Inc (NYSE:PWR) but similarly valued. We will take a look at Etsy Inc (NASDAQ:ETSY), XPO Logistics Inc (NYSE:XPO), FTI Consulting, Inc. (NYSE:FCN), and Santander Consumer USA Holdings Inc (NYSE:SC). This group of stocks’ market values match PWR’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| ETSY | 38 | 712742 | -8 |
| XPO | 36 | 1719666 | 4 |
| FCN | 19 | 175190 | -2 |
| SC | 20 | 423643 | -7 |
| Average | 28.25 | 757810 | -3.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 28.25 hedge funds with bullish positions and the average amount invested in these stocks was $758 million. That figure was $1509 million in PWR’s case. Etsy Inc (NASDAQ:ETSY) is the most popular stock in this table. On the other hand FTI Consulting, Inc. (NYSE:FCN) is the least popular one with only 19 bullish hedge fund positions. Quanta Services Inc (NYSE:PWR) 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 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 8.3% in 2020 through the end of May and surpassed the market by 13.2 percentage points. Unfortunately PWR wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); PWR investors were disappointed as the stock returned 16.6% during the second 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 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
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Disclosure: None. This article was originally published at Insider Monkey.
