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How Did PBF Energy Inc (PBF) Compare Against Top Hedge Fund Stocks in 2019?

Nina Todic

We are still in an overall bull market and many stocks that smart money investors were piling into surged in 2019. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 57% each. Hedge funds' top 3 stock picks returned 44.6% this year and beat the S&P 500 ETFs by nearly 14 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. That's why we believe it isn't a waste of time to check out hedge fund sentiment before you invest in a stock like PBF Energy Inc (NYSE:PBF).

Is PBF Energy Inc (NYSE:PBF) the right pick for your portfolio? The smart money is buying. The number of long hedge fund positions improved by 2 recently. Our calculations also showed that PBF isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video at the end of this article for Q2 rankings).

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds' large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (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 27.8% through November 21, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

[caption id="attachment_25717" align="aligncenter" width="440"] Steven Cohen of Point72 Asset Management[/caption]

We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. One of the most bullish analysts in America just put his money where his mouth is. He says, "I'm investing more today than I did back in early 2009." So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We even check out this option genius' weekly trade ideas. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager's investor letter and the stock already gained 20 percent. Keeping this in mind let's view the latest hedge fund action surrounding PBF Energy Inc (NYSE:PBF).

How have hedgies been trading PBF Energy Inc (NYSE:PBF)?

At the end of the third quarter, a total of 28 of the hedge funds tracked by Insider Monkey were long this stock, a change of 8% from the second quarter of 2019. Below, you can check out the change in hedge fund sentiment towards PBF over the last 17 quarters. With the smart money's positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were adding to their holdings meaningfully (or already accumulated large positions).

The largest stake in PBF Energy Inc (NYSE:PBF) was held by Millennium Management, which reported holding $68.9 million worth of stock at the end of September. It was followed by D E Shaw with a $29 million position. Other investors bullish on the company included AQR Capital Management, Renaissance Technologies, and Point72 Asset Management. In terms of the portfolio weights assigned to each position Solas Capital Management allocated the biggest weight to PBF Energy Inc (NYSE:PBF), around 5.63% of its 13F portfolio. SIR Capital Management is also relatively very bullish on the stock, earmarking 1.47 percent of its 13F equity portfolio to PBF.

As industrywide interest jumped, key money managers were leading the bulls' herd. Balyasny Asset Management, managed by Dmitry Balyasny, initiated the biggest position in PBF Energy Inc (NYSE:PBF). Balyasny Asset Management had $8.3 million invested in the company at the end of the quarter. Frederick Tucker Golden's Solas Capital Management also initiated a $5.4 million position during the quarter. The following funds were also among the new PBF investors: Brandon Haley's Holocene Advisors, Guy Shahar's DSAM Partners, and Sara Nainzadeh's Centenus Global Management.

Let's check out hedge fund activity in other stocks - not necessarily in the same industry as PBF Energy Inc (NYSE:PBF) but similarly valued. These stocks are Five9 Inc (NASDAQ:FIVN), AppFolio Inc (NASDAQ:APPF), Semtech Corporation (NASDAQ:SMTC), and Balchem Corporation (NASDAQ:BCPC). This group of stocks' market valuations resemble PBF's market valuation.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position FIVN,31,579426,8 APPF,11,211977,-1 SMTC,16,218316,-1 BCPC,7,56560,-2 Average,16.25,266570,1 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 16.25 hedge funds with bullish positions and the average amount invested in these stocks was $267 million. That figure was $245 million in PBF's case. Five9 Inc (NASDAQ:FIVN) is the most popular stock in this table. On the other hand Balchem Corporation (NASDAQ:BCPC) is the least popular one with only 7 bullish hedge fund positions. PBF Energy Inc (NYSE:PBF) 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 20 most popular stocks among hedge funds returned 41.1% in 2019 through December 23rd and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. Unfortunately PBF wasn't nearly as popular as these 20 stocks and hedge funds that were betting on PBF were disappointed as the stock returned 2.1% in 2019 (through December 23rd) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year. Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

5 Most Popular Stocks Among Hedge Funds

Disclosure: None. This article was originally published at Insider Monkey.

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