Although the masses and most of the financial media blame hedge funds for their exorbitant fee structure and disappointing performance, these investors have proved to have great stock picking abilities over the years (that’s why their assets under management continue to swell). We believe hedge fund sentiment should serve as a crucial tool of an individual investor’s stock selection process, as it may offer great insights of how the brightest minds of the finance industry feel about specific stocks. After all, these people have access to the smartest analysts and most expensive data/information sources that individual investors can’t match. So should one consider investing in People’s United Financial, Inc. (NASDAQ:PBCT)? The smart money sentiment can provide an answer to this question.
Based on the smart money sentiment in People’s United Financial, Inc. (NASDAQ:PBCT), this might not be the best stock to invest in right now. Hedge fund ownership of the stock dropped by 19% in Q2. However, the stock is owned by several notable funds, including Israel Englander’s Millennium Management (2.11 million shares) and Jim Simons’ Renaissance Technologies (1.01 million shares). With its 26-year run of paying dividends, the bank holding company landed just outside the top 20 on our list of the 25 Best Dividend Stocks for Retirement.
In the financial world there are a lot of indicators stock market investors use to grade stocks. Some of the most innovative indicators are hedge fund and insider trading indicators. Our researchers have shown that, historically, those who follow the best picks of the best hedge fund managers can trounce the S&P 500 by a superb amount (see the details here).
How have hedgies been trading People’s United Financial, Inc. (NASDAQ:PBCT)?
At Q3’s end, a total of 13 of the hedge funds tracked by Insider Monkey were long this stock, a 19% drop from one quarter earlier. On the other hand, there were a total of 18 hedge funds with a bullish position in PBCT in the middle of 2017. With the smart money’s capital changing hands, there exists an “upper tier” of notable hedge fund managers who were boosting their stakes substantially (or already accumulated large positions).
Among these funds, Israel Englander’s Millennium Management held the most valuable stake in People’s United Financial, Inc. (NASDAQ:PBCT), which was worth $38.1 million at the end of the second quarter. On the second spot was Renaissance Technologies which amassed $18.3 million worth of shares. Moreover, Stevens Capital Management, Basswood Capital and Private Capital Management were also bullish on People’s United Financial, Inc. (NASDAQ:PBCT), allocating a large percentage of their portfolios to this stock.
Seeing as People’s United Financial, Inc. (NASDAQ:PBCT) has witnessed falling interest from the aggregate hedge fund industry, logic holds that there is a sect of hedgies that slashed their entire stakes last quarter. It’s worth mentioning that Dmitry Balyasny’s Balyasny Asset Management dumped the largest position of the 700 funds tracked by Insider Monkey, comprising close to $7.8 million in stock. Solomon Kumin’s fund, Folger Hill Asset Management, also sold off its stock, about $2.2 million worth. These moves are interesting, as aggregate hedge fund interest fell by 3 funds last quarter.
Let’s now take a look at hedge fund activity in other stocks similar to People’s United Financial, Inc. (NASDAQ:PBCT). These stocks are DCT Industrial Trust Inc. (NYSE:DCT), Ubiquiti Networks Inc (NASDAQ:UBNT), WABCO Holdings Inc. (NYSE:WBC), and Booz Allen Hamilton Holding Corporation (NYSE:BAH). All of these stocks’ market caps match PBCT’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| DCT | 19 | 423300 | 10 |
| UBNT | 15 | 299556 | 6 |
| WBC | 23 | 598289 | 3 |
| BAH | 22 | 385701 | 6 |
As you can see these stocks had an average of 20 hedge funds with bullish positions and the average amount invested in these stocks was $427 million. That figure was $108 million in PBCT’s case. WABCO Holdings Inc. (NYSE:WBC) is the most popular stock in this table. On the other hand Ubiquiti Networks Inc (NASDAQ:UBNT) is the least popular one with only 15 bullish hedge fund positions. Compared to these stocks People’s United Financial, Inc. (NASDAQ:PBCT) is even less popular than UBNT. Considering that hedge funds aren’t fond of this stock in relation to other companies analyzed in this article, it may be a good idea to analyze it in detail and understand why the smart money is not bullish on this stock, despite its appealing dividend history.
Disclosure: None. This article was originally published at Insider Monkey.
