How do you pick the next stock to invest in? One way would be to spend days of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don’t always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding PG&E Corporation (NYSE:PCG) and determine whether hedge funds had an edge regarding this stock.
PG&E Corporation (NYSE:PCG) investors should be aware of a decrease in activity from the world’s largest hedge funds in recent months. PG&E Corporation (NYSE:PCG) was in 54 hedge funds’ portfolios at the end of the third quarter of 2021. The all time high for this statistic is 92. Our calculations also showed that PCG isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings).
Howard Marks of Oaktree Capital
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. Keeping this in mind we’re going to take a glance at the fresh hedge fund action regarding PG&E Corporation (NYSE:PCG).
Do Hedge Funds Think PCG Is A Good Stock To Buy Now?
At Q3’s end, a total of 54 of the hedge funds tracked by Insider Monkey were long this stock, a change of -16% from one quarter earlier. By comparison, 76 hedge funds held shares or bullish call options in PCG a year ago. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Of the funds tracked by Insider Monkey, Dan Loeb’s Third Point has the number one position in PG&E Corporation (NYSE:PCG), worth close to $786.6 million, accounting for 4.3% of its total 13F portfolio. On Third Point’s heels is Silver Point Capital, led by Edward A. Mule, holding a $362.4 million position; the fund has 17.2% of its 13F portfolio invested in the stock. Other peers that hold long positions encompass Stuart J. Zimmer’s Zimmer Partners, Howard Marks’s Oaktree Capital Management and Jonathan Kolatch’s Redwood Capital Management. In terms of the portfolio weights assigned to each position Silver Point Capital allocated the biggest weight to PG&E Corporation (NYSE:PCG), around 17.23% of its 13F portfolio. Redwood Capital Management is also relatively very bullish on the stock, setting aside 10.39 percent of its 13F equity portfolio to PCG.
Due to the fact that PG&E Corporation (NYSE:PCG) has faced falling interest from the aggregate hedge fund industry, it’s easy to see that there lies a certain “tier” of hedgies who sold off their full holdings heading into Q4. Intriguingly, David Abrams’s Abrams Capital Management sold off the biggest stake of all the hedgies watched by Insider Monkey, valued at about $215.4 million in stock, and Robert Pitts’s Steadfast Capital Management was right behind this move, as the fund cut about $180.2 million worth. These moves are interesting, as total hedge fund interest fell by 10 funds heading into Q4.
Let’s also examine hedge fund activity in other stocks similar to PG&E Corporation (NYSE:PCG). We will take a look at Bio-Techne Corporation (NASDAQ:TECH), Raymond James Financial, Inc. (NYSE:RJF), Burlington Stores Inc (NYSE:BURL), Restaurant Brands International Inc (NYSE:QSR), Avangrid, Inc. (NYSE:AGR), Tradeweb Markets Inc. (NASDAQ:TW), and Tyler Technologies, Inc. (NYSE:TYL). This group of stocks’ market valuations are closest to PCG’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| TECH | 33 | 432450 | 8 |
| RJF | 32 | 767984 | 3 |
| BURL | 45 | 1835947 | 2 |
| QSR | 22 | 1873877 | 0 |
| AGR | 9 | 37232 | -3 |
| TW | 22 | 135429 | 7 |
| TYL | 30 | 772769 | -3 |
| Average | 27.6 | 836527 | 2 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 27.6 hedge funds with bullish positions and the average amount invested in these stocks was $837 million. That figure was $3825 million in PCG’s case. Burlington Stores Inc (NYSE:BURL) is the most popular stock in this table. On the other hand Avangrid, Inc. (NYSE:AGR) is the least popular one with only 9 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 62.6. 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. 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 29.6% in 2021 and managed to beat the market by another 3.6 percentage points. Hedge funds were also right about betting on PCG as the stock returned 33.2% since the end of September (through 1/31) 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.
