We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (see why hell is coming).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. The 800+ hedge funds and famous money managers tracked by Insider Monkey have already compiled and submitted their 13F filings for the fourth quarter, which unveil their equity positions as of December 31. We went through these filings, fixed typos and other more significant errors and identified the changes in hedge fund portfolios. Our extensive review of these public filings is finally over, so this article is set to reveal the smart money sentiment towards PNC Financial Services Group Inc. (NYSE:PNC).
PNC Financial Services Group Inc. (NYSE:PNC) shares haven’t seen a lot of action during the fourth quarter. Overall, hedge fund sentiment was unchanged. The stock was in 42 hedge funds’ portfolios at the end of the fourth quarter of 2019. At the end of this article we will also compare PNC to other stocks including Banco Santander, S.A. (NYSE:SAN), The Bank of Nova Scotia (NYSE:BNS), and Dominion Resources, Inc. (NYSE:D) to get a better sense of its popularity.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 72.9% since March 2017 and outperformed the S&P 500 ETFs by more than 41 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Andrew Sandler of Sandler Capital Management
Keeping this in mind we’re going to take a look at the new hedge fund action encompassing PNC Financial Services Group Inc. (NYSE:PNC).
How have hedgies been trading PNC Financial Services Group Inc. (NYSE:PNC)?
At the end of the fourth quarter, a total of 42 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in PNC over the last 18 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
When looking at the institutional investors followed by Insider Monkey, Warren Buffett’s Berkshire Hathaway has the biggest position in PNC Financial Services Group Inc. (NYSE:PNC), worth close to $1.3842 billion, amounting to 0.6% of its total 13F portfolio. Sitting at the No. 2 spot is AQR Capital Management, managed by Cliff Asness, which holds a $155.9 million position; 0.2% of its 13F portfolio is allocated to the stock. Some other peers that hold long positions comprise Dmitry Balyasny’s Balyasny Asset Management, Phill Gross and Robert Atchinson’s Adage Capital Management and Mario Gabelli’s GAMCO Investors. In terms of the portfolio weights assigned to each position Prospector Partners allocated the biggest weight to PNC Financial Services Group Inc. (NYSE:PNC), around 2.77% of its 13F portfolio. Gillson Capital is also relatively very bullish on the stock, dishing out 2.7 percent of its 13F equity portfolio to PNC.
Because PNC Financial Services Group Inc. (NYSE:PNC) has experienced falling interest from hedge fund managers, it’s safe to say that there were a few money managers that elected to cut their full holdings last quarter. It’s worth mentioning that Clint Carlson’s Carlson Capital cut the largest investment of the “upper crust” of funds followed by Insider Monkey, worth close to $69.7 million in stock. Michael Kharitonov and Jon David McAuliffe’s fund, Voleon Capital, also sold off its stock, about $10 million worth. These transactions are important to note, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as PNC Financial Services Group Inc. (NYSE:PNC) but similarly valued. These stocks are Banco Santander, S.A. (NYSE:SAN), The Bank of Nova Scotia (NYSE:BNS), Dominion Energy, Inc. (NYSE:D), and Intuitive Surgical, Inc. (NASDAQ:ISRG). This group of stocks’ market values are similar to PNC’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| SAN | 21 | 637200 | 0 |
| BNS | 16 | 413736 | 0 |
| D | 37 | 773242 | -8 |
| ISRG | 51 | 1118443 | 6 |
| Average | 31.25 | 735655 | -0.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 31.25 hedge funds with bullish positions and the average amount invested in these stocks was $736 million. That figure was $2157 million in PNC’s case. Intuitive Surgical, Inc. (NASDAQ:ISRG) is the most popular stock in this table. On the other hand The Bank of Nova Scotia (NYSE:BNS) is the least popular one with only 16 bullish hedge fund positions. PNC Financial Services Group Inc. (NYSE:PNC) is not the most popular stock in this group but hedge fund interest is still above average. 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 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 1.0% in 2020 through May 1st but beat the market by 12.9 percentage points. Unfortunately PNC wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on PNC were disappointed as the stock returned -34.2% during the same time period 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 many of these stocks already outperformed the market so far this year.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
