Hedge funds and large money managers usually invest with a focus on the long-term horizon and, therefore, short-lived dips or bumps on the charts usually don’t make them change their opinion towards a company. This time it may be different. The coronavirus pandemic destroyed the high correlations among major industries and asset classes. We are now in a stock pickers market where fundamentals of a stock have more effect on the price than the overall direction of the market. As a result we observe sudden and large changes in hedge fund positions depending on the news flow. Let’s take a look at the hedge fund sentiment towards Pzena Investment Management Inc (NYSE:PZN) to find out whether there were any major changes in hedge funds’ views.
Is Pzena Investment Management Inc (NYSE:PZN) a good stock to buy now? The best stock pickers were in a bearish mood. The number of long hedge fund positions fell by 2 lately. Pzena Investment Management Inc (NYSE:PZN) was in 4 hedge funds’ portfolios at the end of September. The all time high for this statistics is 8. Our calculations also showed that PZN 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). There were 6 hedge funds in our database with PZN holdings at the end of June.
Video: Watch our video about the top 5 most popular hedge fund stocks.
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 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.
John Levin of Levin Capital Strategies
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. Keeping this in mind let’s review the latest hedge fund action encompassing Pzena Investment Management Inc (NYSE:PZN).
Hedge fund activity in Pzena Investment Management Inc (NYSE:PZN)
At the end of the third quarter, a total of 4 of the hedge funds tracked by Insider Monkey were long this stock, a change of -33% from the second quarter of 2020. The graph below displays the number of hedge funds with bullish position in PZN over the last 21 quarters. With hedge funds’ capital changing hands, there exists a select group of key hedge fund managers who were boosting their stakes considerably (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Renaissance Technologies, holds the most valuable position in Pzena Investment Management Inc (NYSE:PZN). Renaissance Technologies has a $5.2 million position in the stock, comprising less than 0.1%% of its 13F portfolio. Coming in second is GAMCO Investors, led by Mario Gabelli, holding a $0.4 million position; less than 0.1%% of its 13F portfolio is allocated to the company. Other members of the smart money that hold long positions include John A. Levin’s Levin Capital Strategies, David Harding’s Winton Capital Management and . In terms of the portfolio weights assigned to each position Levin Capital Strategies allocated the biggest weight to Pzena Investment Management Inc (NYSE:PZN), around 0.01% of its 13F portfolio. Renaissance Technologies is also relatively very bullish on the stock, setting aside 0.01 percent of its 13F equity portfolio to PZN.
Seeing as Pzena Investment Management Inc (NYSE:PZN) has faced falling interest from the smart money, we can see that there were a few hedgies that slashed their full holdings heading into Q4. Interestingly, Greg Eisner’s Engineers Gate Manager dumped the largest investment of the “upper crust” of funds monitored by Insider Monkey, comprising about $0.1 million in stock. Roger Ibbotson’s fund, Zebra Capital Management, also said goodbye to its stock, about $0.1 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest dropped by 2 funds heading into Q4.
Let’s go over hedge fund activity in other stocks similar to Pzena Investment Management Inc (NYSE:PZN). We will take a look at Co-Diagnostics, Inc. (NASDAQ:CODX), Peoples Bancorp Inc. (NASDAQ:PEBO), Heidrick & Struggles International, Inc. (NASDAQ:HSII), Donegal Group, Inc. (NASDAQ:DGICB), Altabancorp (NASDAQ:ALTA), BioDelivery Sciences International, Inc. (NASDAQ:BDSI), and Avid Technology, Inc. (NASDAQ:AVID). This group of stocks’ market valuations resemble PZN’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CODX | 5 | 3221 | 1 |
| PEBO | 7 | 9510 | -2 |
| HSII | 14 | 76146 | -2 |
| DGICB | 1 | 216 | 0 |
| ALTA | 5 | 15512 | 1 |
| BDSI | 21 | 88274 | -5 |
| AVID | 19 | 124431 | 2 |
| Average | 10.3 | 45330 | -0.7 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 10.3 hedge funds with bullish positions and the average amount invested in these stocks was $45 million. That figure was $6 million in PZN’s case. BioDelivery Sciences International, Inc. (NASDAQ:BDSI) is the most popular stock in this table. On the other hand Donegal Group, Inc. (NASDAQ:DGICB) is the least popular one with only 1 bullish hedge fund positions. Pzena Investment Management Inc (NYSE:PZN) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for PZN is 25.5. 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 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 PZN as the stock returned 31% since the end of the third quarter (through 11/27) and outperformed the market by an even larger margin.
Follow Pzena Investment Management Inc. (NYSE:PZN)
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Disclosure: None. This article was originally published at Insider Monkey.
