The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 823 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds' and investors' portfolio positions as of June 30th, when the S&P 500 Index was trading around the 3100 level. Stocks kept going up since then. In this article we look at how hedge funds traded PacWest Bancorp (NASDAQ:PACW) and determine whether the smart money was really smart about this stock.
Is PacWest Bancorp (NASDAQ:PACW) the right pick for your portfolio? Hedge funds were in a bullish mood. The number of bullish hedge fund bets advanced by 1 recently. PacWest Bancorp (NASDAQ:PACW) was in 24 hedge funds' portfolios at the end of the second quarter of 2020. The all time high for this statistics is 31. Our calculations also showed that PACW isn't among the 30 most popular stocks among hedge funds (click for Q2 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.
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 56 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 34% through August 17th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Matthew Lindenbaum of Basswood Capital
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, legal marijuana is one of the fastest growing industries right now, so we are checking out stock pitches like “the Starbucks of cannabis” to identify the next tenbagger. 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 to get excerpts of these letters in your inbox. Now let's analyze the recent hedge fund action surrounding PacWest Bancorp (NASDAQ:PACW).
How have hedgies been trading PacWest Bancorp (NASDAQ:PACW)?
At second quarter's end, a total of 24 of the hedge funds tracked by Insider Monkey were long this stock, a change of 4% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards PACW over the last 20 quarters. With the smart money's capital changing hands, there exists an "upper tier" of notable hedge fund managers who were upping their holdings meaningfully (or already accumulated large positions).
The largest stake in PacWest Bancorp (NASDAQ:PACW) was held by Cardinal Capital, which reported holding $66.8 million worth of stock at the end of September. It was followed by Citadel Investment Group with a $50.7 million position. Other investors bullish on the company included Carlson Capital, Fisher Asset Management, and Basswood Capital. In terms of the portfolio weights assigned to each position Cardinal Capital allocated the biggest weight to PacWest Bancorp (NASDAQ:PACW), around 2.79% of its 13F portfolio. Basswood Capital is also relatively very bullish on the stock, designating 2.21 percent of its 13F equity portfolio to PACW.
Now, key hedge funds were leading the bulls' herd. Carlson Capital, managed by Clint Carlson, established the largest position in PacWest Bancorp (NASDAQ:PACW). Carlson Capital had $33.4 million invested in the company at the end of the quarter. Emanuel J. Friedman's EJF Capital also made a $3.5 million investment in the stock during the quarter. The other funds with new positions in the stock are Noam Gottesman's GLG Partners, Mario Gabelli's GAMCO Investors, and Minhua Zhang's Weld Capital Management.
Let's now review hedge fund activity in other stocks - not necessarily in the same industry as PacWest Bancorp (NASDAQ:PACW) but similarly valued. We will take a look at Compañía de Minas Buenaventura S.A.A. (NYSE:BVN), South Jersey Industries Inc (NYSE:SJI), HB Fuller Co (NYSE:FUL), Focus Financial Partners Inc. (NASDAQ:FOCS), The Brink's Company (NYSE:BCO), Fabrinet (NYSE:FN), and MACOM Technology Solutions Holdings Inc (NASDAQ:MTSI). All of these stocks' market caps match PACW's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position BVN,7,82182,-2 SJI,14,87528,1 FUL,10,140210,-8 FOCS,9,61281,2 BCO,25,255601,1 FN,23,120739,1 MTSI,23,290386,7 Average,15.9,148275,0.3 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 15.9 hedge funds with bullish positions and the average amount invested in these stocks was $148 million. That figure was $235 million in PACW's case. The Brink's Company (NYSE:BCO) is the most popular stock in this table. On the other hand Compañía de Minas Buenaventura S.A.A. (NYSE:BVN) is the least popular one with only 7 bullish hedge fund positions. PacWest Bancorp (NASDAQ:PACW) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for PACW is 76.4. 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 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 21.3% in 2020 through September 25th and beat the market by 17.7 percentage points. Unfortunately PACW wasn't nearly as popular as these 10 stocks and hedge funds that were betting on PACW were disappointed as the stock returned -16.8% 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.
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Disclosure: None. This article was originally published at Insider Monkey.