We know that hedge funds generate strong, risk-adjusted returns over the long run, which is why imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, professional investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn't mean that they don't have occasional colossal losses; they do. However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, let’s examine the smart money sentiment towards PolyOne Corporation (NYSE:POL) and determine whether hedge funds skillfully traded this stock.
Is PolyOne Corporation (NYSE:POL) the right investment to pursue these days? Hedge funds were buying. The number of bullish hedge fund positions moved up by 4 lately. Our calculations also showed that POL isn't among the 30 most popular stocks among hedge funds (click for Q1 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.
To most investors, hedge funds are seen as worthless, old investment vehicles of the past. While there are more than 8000 funds trading today, Our researchers look at the bigwigs of this club, around 850 funds. It is estimated that this group of investors shepherd the lion's share of the smart money's total asset base, and by observing their top picks, Insider Monkey has identified a number of investment strategies that have historically outpaced the broader indices. Insider Monkey's flagship short hedge fund strategy outpaced the S&P 500 short ETFs by around 20 percentage points per annum since its inception in March 2017. Our portfolio of short stocks lost 36% since February 2017 (through May 18th) even though the market was up 30% during the same period. We just shared a list of 8 short targets in our latest quarterly update .
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Lee Ainslie of Maverick Capital[/caption]
At Insider Monkey we scour multiple sources to uncover the next great investment idea. There is a lot of volatility in the markets and this presents amazing investment opportunities from time to time. For example, this trader claims to deliver juiced up returns with one trade a week, so we are checking out his highest conviction idea. A second trader claims to score lucrative profits by utilizing a "weekend trading strategy", so we look into his strategy's picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We recently recommended several stocks partly inspired by legendary Bill Miller's investor letter. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind let's take a look at the key hedge fund action regarding PolyOne Corporation (NYSE:POL).
Hedge fund activity in PolyOne Corporation (NYSE:POL)
At the end of the first quarter, a total of 28 of the hedge funds tracked by Insider Monkey were long this stock, a change of 17% from one quarter earlier. On the other hand, there were a total of 23 hedge funds with a bullish position in POL a year ago. With the smart money's sentiment swirling, there exists a select group of noteworthy hedge fund managers who were boosting their stakes substantially (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Israel Englander's Millennium Management has the most valuable position in PolyOne Corporation (NYSE:POL), worth close to $23.7 million, accounting for 0.1% of its total 13F portfolio. The second largest stake is held by D E Shaw, led by D. E. Shaw, holding a $23.2 million position; less than 0.1%% of its 13F portfolio is allocated to the company. Other hedge funds and institutional investors that are bullish encompass Cliff Asness's AQR Capital Management, Phill Gross and Robert Atchinson's Adage Capital Management and Ken Griffin's Citadel Investment Group. In terms of the portfolio weights assigned to each position Barington Capital Group allocated the biggest weight to PolyOne Corporation (NYSE:POL), around 5.71% of its 13F portfolio. Appian Way Asset Management is also relatively very bullish on the stock, dishing out 2.85 percent of its 13F equity portfolio to POL.
With a general bullishness amongst the heavyweights, key money managers were leading the bulls' herd. Scopus Asset Management, managed by Alexander Mitchell, assembled the largest position in PolyOne Corporation (NYSE:POL). Scopus Asset Management had $9.5 million invested in the company at the end of the quarter. Thomas E. Claugus's GMT Capital also initiated a $6.9 million position during the quarter. The following funds were also among the new POL investors: Andrew Byington's Appian Way Asset Management, Lee Ainslie's Maverick Capital, and Peter Muller's PDT Partners.
Let's go over hedge fund activity in other stocks similar to PolyOne Corporation (NYSE:POL). We will take a look at International Bancshares Corp (NASDAQ:IBOC), Baozun Inc (NASDAQ:BZUN), NetScout Systems, Inc. (NASDAQ:NTCT), and WPX Energy Inc (NYSE:WPX). This group of stocks' market caps match POL's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position IBOC,16,96910,-4 BZUN,12,35603,-3 NTCT,12,82203,-8 WPX,29,411632,-15 Average,17.25,156587,-7.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 17.25 hedge funds with bullish positions and the average amount invested in these stocks was $157 million. That figure was $165 million in POL's case. WPX Energy Inc (NYSE:WPX) is the most popular stock in this table. On the other hand Baozun Inc (NASDAQ:BZUN) is the least popular one with only 12 bullish hedge fund positions. PolyOne Corporation (NYSE:POL) is not the most popular stock in this group but hedge fund interest is still above average. 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 12.3% in 2020 through June 30th but still beat the market by 15.5 percentage points. Hedge funds were also right about betting on POL as the stock returned 39.3% in Q2 and outperformed the market. Hedge funds were rewarded for their relative bullishness.
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Disclosure: None. This article was originally published at Insider Monkey.