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 PotlatchDeltic Corporation (NASDAQ:PCH).
Is PotlatchDeltic Corporation (NASDAQ:PCH) a buy, sell, or hold? The best stock pickers were in an optimistic mood. The number of long hedge fund positions improved by 3 recently. PotlatchDeltic Corporation (NASDAQ:PCH) was in 26 hedge funds’ portfolios at the end of March. The all time high for this statistic is 26. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that PCH isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings). There were 23 hedge funds in our database with PCH holdings at the end of December.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 115 percentage points since March 2017 (see the details here). That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Fred DiSanto of Ancora Advisors
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, economists warn of inflation flare up. So, we are checking out this backdoor gold play that has hit peak gains of 718% in a little over a year. We go through lists like the 10 best battery 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. Now let’s review the latest hedge fund action regarding PotlatchDeltic Corporation (NASDAQ:PCH).
Do Hedge Funds Think PCH Is A Good Stock To Buy Now?
At the end of the first quarter, a total of 26 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 13% from the fourth quarter of 2020. By comparison, 16 hedge funds held shares or bullish call options in PCH a year ago. With hedgies’ positions undergoing their usual ebb and flow, there exists a select group of noteworthy hedge fund managers who were adding to their holdings considerably (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Renaissance Technologies has the number one position in PotlatchDeltic Corporation (NASDAQ:PCH), worth close to $53.3 million, accounting for 0.1% of its total 13F portfolio. On Renaissance Technologies’s heels is Citadel Investment Group, managed by Ken Griffin, which holds a $18.8 million position; less than 0.1%% of its 13F portfolio is allocated to the stock. Remaining peers with similar optimism encompass Israel Englander’s Millennium Management, Frederick DiSanto’s Ancora Advisors and D. E. Shaw’s D E Shaw. In terms of the portfolio weights assigned to each position Intrepid Capital Management allocated the biggest weight to PotlatchDeltic Corporation (NASDAQ:PCH), around 2.19% of its 13F portfolio. Zebra Capital Management is also relatively very bullish on the stock, dishing out 1.16 percent of its 13F equity portfolio to PCH.
As one would reasonably expect, key hedge funds have been driving this bullishness. Castle Hook Partners, managed by Josh Donfeld and David Rogers, established the biggest position in PotlatchDeltic Corporation (NASDAQ:PCH). Castle Hook Partners had $5.6 million invested in the company at the end of the quarter. Mika Toikka’s AlphaCrest Capital Management also initiated a $1.6 million position during the quarter. The other funds with new positions in the stock are Michael Gelband’s ExodusPoint Capital, Joel Greenblatt’s Gotham Asset Management, and Paul Marshall and Ian Wace’s Marshall Wace LLP.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as PotlatchDeltic Corporation (NASDAQ:PCH) but similarly valued. These stocks are Equitrans Midstream Corporation (NYSE:ETRN), Applied Industrial Technologies Inc (NYSE:AIT), Diodes Incorporated (NASDAQ:DIOD), SPS Commerce, Inc. (NASDAQ:SPSC), Bed Bath & Beyond Inc. (NASDAQ:BBBY), Cronos Group Inc. (NASDAQ:CRON), and Ambarella Inc (NASDAQ:AMBA). This group of stocks’ market caps resemble PCH’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| ETRN | 28 | 361643 | 3 |
| AIT | 21 | 67909 | 0 |
| DIOD | 21 | 161053 | 7 |
| SPSC | 20 | 133241 | 6 |
| BBBY | 23 | 314226 | -10 |
| CRON | 10 | 126181 | -1 |
| AMBA | 35 | 286944 | -1 |
| Average | 22.6 | 207314 | 0.6 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 22.6 hedge funds with bullish positions and the average amount invested in these stocks was $207 million. That figure was $152 million in PCH’s case. Ambarella Inc (NASDAQ:AMBA) is the most popular stock in this table. On the other hand Cronos Group Inc. (NASDAQ:CRON) is the least popular one with only 10 bullish hedge fund positions. PotlatchDeltic Corporation (NASDAQ:PCH) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for PCH is 70. 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 24% in 2021 through July 9th and beat the market again by 6.7 percentage points. Unfortunately PCH wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on PCH were disappointed as the stock returned 4.8% since the end of March (through 7/9) 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 Potlatchdeltic Corp (NASDAQ:PCH)
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Disclosure: None. This article was originally published at Insider Monkey.
