Although the masses and most of the financial media blame hedge funds for their exorbitant fee structure and disappointing performance, these investors have proved to have great stock picking abilities over the years (that’s why their assets under management continue to swell). We believe hedge fund sentiment should serve as a crucial tool of an individual investor’s stock selection process, as it may offer great insights of how the brightest minds of the finance industry feel about specific stocks. After all, these people have access to smartest analysts and expensive data/information sources that individual investors can’t match. So should one consider investing in Prudential Public Limited Company (NYSE:PUK)? The smart money sentiment can provide an answer to this question.
Is Prudential Public Limited Company (NYSE:PUK) a good investment now? Investors who are in the know were becoming less hopeful. The number of long hedge fund bets went down by 1 lately. Prudential Public Limited Company (NYSE:PUK) was in 4 hedge funds’ portfolios at the end of September. The all time high for this statistics is 12. Our calculations also showed that PUK isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks).
Video: Watch our video about the top 5 most popular hedge fund stocks.
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 66 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Israel Englander of Millennium Management
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. 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 website. Keeping this in mind we’re going to take a peek at the latest hedge fund action encompassing Prudential Public Limited Company (NYSE:PUK).
What does smart money think about Prudential Public Limited Company (NYSE:PUK)?
At the end of the third quarter, a total of 4 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -20% from the second quarter of 2020. By comparison, 12 hedge funds held shares or bullish call options in PUK a year ago. So, let’s find out 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, Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, holds the largest position in Prudential Public Limited Company (NYSE:PUK). Arrowstreet Capital has a $2.8 million position in the stock, comprising less than 0.1%% of its 13F portfolio. The second largest stake is held by Solel Partners, led by Craig Peskin and Peter Fleiss, holding a $2.1 million position; the fund has 0.7% of its 13F portfolio invested in the stock. Remaining hedge funds and institutional investors that hold long positions include Israel Englander’s Millennium Management, Ken Griffin’s Citadel Investment Group and . In terms of the portfolio weights assigned to each position Solel Partners allocated the biggest weight to Prudential Public Limited Company (NYSE:PUK), around 0.67% of its 13F portfolio. Arrowstreet Capital is also relatively very bullish on the stock, designating 0.0044 percent of its 13F equity portfolio to PUK.
Judging by the fact that Prudential Public Limited Company (NYSE:PUK) has witnessed falling interest from the entirety of the hedge funds we track, we can see that there lies a certain “tier” of fund managers that slashed their positions entirely last quarter. Interestingly, Renaissance Technologies dumped the largest stake of the 750 funds followed by Insider Monkey, totaling about $5.4 million in stock. Ryan Tolkin (CIO)’s fund, Schonfeld Strategic Advisors, also cut its stock, about $0.8 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest dropped by 1 funds last quarter.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Prudential Public Limited Company (NYSE:PUK) but similarly valued. These stocks are Banco Santander (Brasil) SA (NYSE:BSBR), L3Harris Technologies, Inc. (NYSE:LHX), The Kraft Heinz Company (NASDAQ:KHC), Constellation Brands, Inc. (NYSE:STZ), eBay Inc (NASDAQ:EBAY), Telefonaktiebolaget LM Ericsson (publ) (NASDAQ:ERIC), and Xcel Energy Inc (NASDAQ:XEL). This group of stocks’ market valuations resemble PUK’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| BSBR | 5 | 9931 | -5 |
| LHX | 42 | 1149064 | -8 |
| KHC | 39 | 10114221 | 4 |
| STZ | 53 | 2196149 | 0 |
| EBAY | 50 | 4887490 | -8 |
| ERIC | 23 | 302159 | 0 |
| XEL | 22 | 355752 | -1 |
| Average | 33.4 | 2716395 | -2.6 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 33.4 hedge funds with bullish positions and the average amount invested in these stocks was $2716 million. That figure was $7 million in PUK’s case. Constellation Brands, Inc. (NYSE:STZ) is the most popular stock in this table. On the other hand Banco Santander (Brasil) SA (NYSE:BSBR) is the least popular one with only 5 bullish hedge fund positions. Compared to these stocks Prudential Public Limited Company (NYSE:PUK) is even less popular than BSBR. Our overall hedge fund sentiment score for PUK is 14. 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. Hedge funds clearly dropped the ball on PUK as the stock delivered strong returns, though hedge funds’ consensus picks still generated respectable returns. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 30.7% in 2020 through November 27th and still beat the market by 16.1 percentage points. A small number of hedge funds were also right about betting on PUK as the stock returned 13.6% since Q3 (through November 27th) and outperformed the market by an even larger margin.
Follow Prudential Plc (NYSE:PUK)
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Disclosure: None. This article was originally published at Insider Monkey.
