Last year we predicted the arrival of the first US recession since 2009 and we told in advance that the market will decline by at least 20% in (Recession is Imminent: We Need A Travel Ban NOW). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards PG&E Corporation (NYSE:PCG).
PG&E Corporation (NYSE:PCG) has seen a decrease in activity from the world’s largest hedge funds recently. PG&E Corporation (NYSE:PCG) was in 64 hedge funds’ portfolios at the end of the second quarter of 2021. The all time high for this statistic is 92. There were 65 hedge funds in our database with PCG holdings at the end of March. Our calculations also showed that PCG isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).
So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 more than 79 percentage points since March 2017 (see the details here). We have been able to outperform the passive index funds by tracking the moves of corporate insiders and hedge funds, and we believe small investors can benefit a lot from reading hedge fund investor letters and 13F filings.
Howard Marks of Oaktree Capital Management
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, the demand for helium is soaring and there is a helium supply shortage, so we are checking out stock pitches like this emerging helium stock. 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. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. Keeping this in mind we’re going to take a glance at the latest hedge fund action encompassing PG&E Corporation (NYSE:PCG).
Do Hedge Funds Think PCG Is A Good Stock To Buy Now?
At Q2’s end, a total of 64 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -2% from the previous quarter. By comparison, 92 hedge funds held shares or bullish call options in PCG a year ago. With hedgies’ capital changing hands, there exists a few key hedge fund managers who were boosting their holdings meaningfully (or already accumulated large positions).
More specifically, Third Point was the largest shareholder of PG&E Corporation (NYSE:PCG), with a stake worth $833.3 million reported as of the end of June. Trailing Third Point was Zimmer Partners, which amassed a stake valued at $471 million. Baupost Group, Oaktree Capital Management, and Silver Point Capital 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 Silver Point Capital allocated the biggest weight to PG&E Corporation (NYSE:PCG), around 15.45% of its 13F portfolio. Nut Tree Capital is also relatively very bullish on the stock, earmarking 10.53 percent of its 13F equity portfolio to PCG.
Seeing as PG&E Corporation (NYSE:PCG) has witnessed a decline in interest from the entirety of the hedge funds we track, it’s easy to see that there is a sect of fund managers that slashed their positions entirely last quarter. Intriguingly, Stephen C. Freidheim’s Cyrus Capital Partners sold off the biggest investment of the “upper crust” of funds tracked by Insider Monkey, worth about $102.5 million in stock. Peter S. Park’s fund, Park West Asset Management, also sold off its stock, about $23.4 million worth. These bearish behaviors are important to note, as total hedge fund interest fell by 1 funds last quarter.
Let’s now review hedge fund activity in other stocks similar to PG&E Corporation (NYSE:PCG). We will take a look at SK Telecom Co., Ltd. (NYSE:SKM), Seagate Technology plc (NASDAQ:STX), KeyCorp (NYSE:KEY), Entergy Corporation (NYSE:ETR), L Brands Inc (NYSE:LB), Alnylam Pharmaceuticals, Inc. (NASDAQ:ALNY), and Lyft, Inc. (NASDAQ:LYFT). All of these stocks’ market caps are closest to PCG’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| SKM | 8 | 68342 | 0 |
| STX | 31 | 1919802 | 4 |
| KEY | 40 | 443140 | -1 |
| ETR | 31 | 595450 | 0 |
| LB | 53 | 6315005 | -6 |
| ALNY | 33 | 1022981 | 0 |
| LYFT | 43 | 1385923 | -17 |
| Average | 34.1 | 1678663 | -2.9 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 34.1 hedge funds with bullish positions and the average amount invested in these stocks was $1679 million. That figure was $4664 million in PCG’s case. L Brands Inc (NYSE:LB) is the most popular stock in this table. On the other hand SK Telecom Co., Ltd. (NYSE:SKM) is the least popular one with only 8 bullish hedge fund positions. Compared to these stocks PG&E Corporation (NYSE:PCG) is more popular among hedge funds. Our overall hedge fund sentiment score for PCG is 74.9. 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. 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 returned 26.3% in 2021 through October 29th but still managed to beat the market by 2.3 percentage points. Hedge funds were also right about betting on PCG as the stock returned 14.1% since the end of June (through 10/29) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.
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Disclosure: None. This article was originally published at Insider Monkey.
