The elite funds run by legendary investors such as David Tepper and Dan Loeb make hundreds of millions of dollars for themselves and their investors by spending enormous resources doing research on small cap stocks that big investment banks don't follow. Because of their pay structures, they have strong incentives to do the research necessary to beat the market. That's why we pay close attention to what they think in small cap stocks. In this article, we take a closer look at POSCO (NYSE:PKX) from the perspective of those elite funds.
According to most stock holders, hedge funds are assumed to be slow, outdated financial vehicles of the past. While there are more than 8000 funds trading at present, Our researchers look at the moguls of this club, around 750 funds. It is estimated that this group of investors handle the lion's share of the hedge fund industry's total asset base, and by following their top investments, Insider Monkey has formulated many investment strategies that have historically outperformed Mr. Market. Insider Monkey's flagship hedge fund strategy surpassed the S&P 500 index by nearly 5 percentage points annually since its inception in May 2014 through early November 2018. We were able to generate large returns even by identifying short candidates. Our portfolio of short stocks lost 27.5% since February 2017 (through March 12th) even though the market was up nearly 25% during the same period. We just shared a list of 6 short targets in our latest quarterly update and they are already down an average of 6% in less than a month.
Let's take a peek at the key hedge fund action encompassing POSCO (NYSE:PKX).
How have hedgies been trading POSCO (NYSE:PKX)?
Heading into the first quarter of 2019, a total of 15 of the hedge funds tracked by Insider Monkey were long this stock, a change of 7% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards PKX over the last 14 quarters. With hedgies' capital changing hands, there exists a few notable hedge fund managers who were adding to their stakes substantially (or already accumulated large positions).
Among these funds, Arrowstreet Capital held the most valuable stake in POSCO (NYSE:PKX), which was worth $62.6 million at the end of the third quarter. On the second spot was LMR Partners which amassed $14.3 million worth of shares. Moreover, Fairfax Financial Holdings, Pzena Investment Management, and D E Shaw were also bullish on POSCO (NYSE:PKX), allocating a large percentage of their portfolios to this stock.
Consequently, key money managers have jumped into POSCO (NYSE:PKX) headfirst. Citadel Investment Group, managed by Ken Griffin, established the most outsized position in POSCO (NYSE:PKX). Citadel Investment Group had $0.8 million invested in the company at the end of the quarter. John Overdeck and David Siegel's Two Sigma Advisors also made a $0.7 million investment in the stock during the quarter. The following funds were also among the new PKX investors: Minhua Zhang's Weld Capital Management and Matthew Hulsizer's PEAK6 Capital Management.
Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as POSCO (NYSE:PKX) but similarly valued. These stocks are Cheniere Energy Partners LP (NYSE:CQP), Boston Properties, Inc. (NYSE:BXP), SK Telecom Co., Ltd. (NYSE:SKM), and Cerner Corporation (NASDAQ:CERN). This group of stocks' market valuations are similar to PKX's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CQP,4,14561,0 BXP,17,348411,0 SKM,6,88249,1 CERN,22,642762,-3 Average,12.25,273496,-0.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 12.25 hedge funds with bullish positions and the average amount invested in these stocks was $273 million. That figure was $119 million in PKX's case. Cerner Corporation (NASDAQ:CERN) is the most popular stock in this table. On the other hand Cheniere Energy Partners LP (NYSE:CQP) is the least popular one with only 4 bullish hedge fund positions. POSCO (NYSE:PKX) is not the most popular stock in this group but hedge fund interest is still above average. 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 15 most popular stocks among hedge funds returned 19.7% through March 15th and outperformed the S&P 500 ETF (SPY) by 6.6 percentage points. Unfortunately PKX wasn't in this group. Hedge funds that bet on PKX were disappointed as the stock returned 4.5% and underperformed the market. If you are interested in investing in large cap stocks, you should check out the top 15 hedge fund stocks as 13 of these outperformed the market.
Disclosure: None. This article was originally published at Insider Monkey.