Most investors tend to think that hedge funds and other asset managers are worthless, as they cannot beat even simple index fund portfolios. In fact, most people expect hedge funds to compete with and outperform the bull market that we have witnessed in recent years. However, hedge funds are generally partially hedged and aim at delivering attractive risk-adjusted returns rather than following the ups and downs of equity markets hoping that they will outperform the broader market. Our research shows that certain hedge funds do have great stock picking skills (and we can identify these hedge funds in advance pretty accurately), so let’s take a glance at the smart money sentiment towards Pinnacle West Capital Corporation (NYSE:PNW).
Pinnacle West Capital Corporation (NYSE:PNW) investors should pay attention to an increase in enthusiasm from smart money of late. Pinnacle West Capital Corporation (NYSE:PNW) was in 21 hedge funds’ portfolios at the end of September. The all time high for this statistic is 27. There were 18 hedge funds in our database with PNW holdings at the end of June. Our calculations also showed that PNW isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).
Cliff Asness of AQR Capital Management
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. With all of this in mind we’re going to take a gander at the key hedge fund action encompassing Pinnacle West Capital Corporation (NYSE:PNW).
Do Hedge Funds Think PNW Is A Good Stock To Buy Now?
At the end of the third quarter, a total of 21 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 17% from the second quarter of 2021. The graph below displays the number of hedge funds with bullish position in PNW over the last 25 quarters. With hedge funds’ sentiment swirling, there exists a select group of key hedge fund managers who were adding to their holdings considerably (or already accumulated large positions).
More specifically, Renaissance Technologies was the largest shareholder of Pinnacle West Capital Corporation (NYSE:PNW), with a stake worth $49.8 million reported as of the end of September. Trailing Renaissance Technologies was AQR Capital Management, which amassed a stake valued at $36.2 million. Adage Capital Management, Citadel Investment Group, and Millennium Management 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 TwinBeech Capital allocated the biggest weight to Pinnacle West Capital Corporation (NYSE:PNW), around 0.16% of its 13F portfolio. Caxton Associates LP is also relatively very bullish on the stock, dishing out 0.15 percent of its 13F equity portfolio to PNW.
As one would reasonably expect, key money managers have jumped into Pinnacle West Capital Corporation (NYSE:PNW) headfirst. Tudor Investment Corp, managed by Paul Tudor Jones, established the most outsized position in Pinnacle West Capital Corporation (NYSE:PNW). Tudor Investment Corp had $8.1 million invested in the company at the end of the quarter. Jinghua Yan’s TwinBeech Capital also initiated a $2.3 million position during the quarter. The following funds were also among the new PNW investors: Greg Eisner’s Engineers Gate Manager, Dmitry Balyasny’s Balyasny Asset Management, and Bruce Kovner’s Caxton Associates LP.
Let’s check out hedge fund activity in other stocks similar to Pinnacle West Capital Corporation (NYSE:PNW). We will take a look at Arrival (NASDAQ:ARVL), Commerce Bancshares, Inc. (NASDAQ:CBSH), Apache Corporation (NYSE:APA), Penske Automotive Group, Inc. (NYSE:PAG), Nutanix, Inc. (NASDAQ:NTNX), Tetra Tech, Inc. (NASDAQ:TTEK), and Arrow Electronics, Inc. (NYSE:ARW). This group of stocks’ market valuations resemble PNW’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| ARVL | 4 | 10081 | -13 |
| CBSH | 16 | 106578 | 0 |
| APA | 33 | 458675 | -4 |
| PAG | 17 | 241932 | -2 |
| NTNX | 28 | 1277247 | -1 |
| TTEK | 16 | 119537 | -9 |
| ARW | 20 | 683945 | -10 |
| Average | 19.1 | 413999 | -5.6 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 19.1 hedge funds with bullish positions and the average amount invested in these stocks was $414 million. That figure was $175 million in PNW’s case. Apache Corporation (NYSE:APA) is the most popular stock in this table. On the other hand Arrival (NASDAQ:ARVL) is the least popular one with only 4 bullish hedge fund positions. Pinnacle West Capital Corporation (NYSE:PNW) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for PNW is 60.6. 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. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. 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 29.6% in 2021 and beat the market again by 3.6 percentage points. Unfortunately PNW wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on PNW were disappointed as the stock returned -1.2% since the end of September (through 12/31) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.
Follow Pinnacle West Capital Corp (NYSE:PNW)
Follow Pinnacle West Capital Corp (NYSE:PNW)
Suggested Articles:
- 15 Best Stocks To Buy Now For Beginner Investors
- 10 Best Dividend Stocks for Passive Income
- 20 Short Dating Profile Examples for Males
Disclosure: None. This article was originally published at Insider Monkey.
