In this article we will check out the progression of hedge fund sentiment towards Principal Financial Group Inc (NASDAQ:PFG) and determine whether it is a good investment right now. We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also employ numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.
Principal Financial Group Inc (NASDAQ:PFG) was in 31 hedge funds’ portfolios at the end of the first quarter of 2021. The all time high for this statistic is 31. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. PFG investors should pay attention to an increase in enthusiasm from smart money recently. There were 26 hedge funds in our database with PFG holdings at the end of December. Our calculations also showed that PFG isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).
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.
Stuart Zimmer of Zimmer Partners
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium 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. With all of this in mind let’s take a glance at the key hedge fund action encompassing Principal Financial Group Inc (NASDAQ:PFG).
Do Hedge Funds Think PFG Is A Good Stock To Buy Now?
At the end of March, a total of 31 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 19% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards PFG over the last 23 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Prana Capital Management was the largest shareholder of Principal Financial Group Inc (NASDAQ:PFG), with a stake worth $38 million reported as of the end of March. Trailing Prana Capital Management was Schonfeld Strategic Advisors, which amassed a stake valued at $35.1 million. Zimmer Partners, Impax Asset Management, and Adage Capital Management 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 Prana Capital Management allocated the biggest weight to Principal Financial Group Inc (NASDAQ:PFG), around 3.11% of its 13F portfolio. Arjuna Capital is also relatively very bullish on the stock, earmarking 1.21 percent of its 13F equity portfolio to PFG.
As aggregate interest increased, key money managers were breaking ground themselves. Schonfeld Strategic Advisors, managed by Ryan Tolkin (CIO), established the biggest position in Principal Financial Group Inc (NASDAQ:PFG). Schonfeld Strategic Advisors had $35.1 million invested in the company at the end of the quarter. Phill Gross and Robert Atchinson’s Adage Capital Management also initiated a $16.8 million position during the quarter. The other funds with new positions in the stock are Daniel Johnson’s Gillson Capital, Joseph Samuels’s Islet Management, and Richard SchimeláandáLawrence Sapanski’s Cinctive Capital Management.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Principal Financial Group Inc (NASDAQ:PFG) but similarly valued. These stocks are Fomento Económico Mexicano, S.A.B. de C.V. (NYSE:FMX), Steris Plc (NYSE:STE), Varian Medical Systems, Inc. (NYSE:VAR), Gartner Inc (NYSE:IT), NetApp Inc. (NASDAQ:NTAP), Monolithic Power Systems, Inc. (NASDAQ:MPWR), and RLX Technology Inc. (NYSE:RLX). This group of stocks’ market valuations resemble PFG’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| FMX | 15 | 845908 | 1 |
| STE | 30 | 1473753 | -6 |
| VAR | 40 | 2286942 | -9 |
| IT | 40 | 1737049 | 3 |
| NTAP | 26 | 317433 | -8 |
| MPWR | 32 | 531499 | 2 |
| RLX | 23 | 246890 | 23 |
| Average | 29.4 | 1062782 | 0.9 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 29.4 hedge funds with bullish positions and the average amount invested in these stocks was $1063 million. That figure was $208 million in PFG’s case. Varian Medical Systems, Inc. (NYSE:VAR) is the most popular stock in this table. On the other hand Fomento Económico Mexicano, S.A.B. de C.V. (NYSE:FMX) is the least popular one with only 15 bullish hedge fund positions. Principal Financial Group Inc (NASDAQ:PFG) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for PFG is 72. 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 22.8% in 2021 through July 2nd and beat the market again by 6 percentage points. Unfortunately PFG wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on PFG were disappointed as the stock returned 6.5% since the end of March (through 7/2) 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.
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Disclosure: None. This article was originally published at Insider Monkey.
