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Hedge Fund Consensus Stocks vs. PG&E Corporation (NYSE:PCG) In 2019

Insider Monkey Staff

Many investors, including Paul Tudor Jones or Stan Druckenmiller, have been saying before last year's Q4 market crash that the stock market is overvalued due to a low-interest-rate environment that leads to companies swapping their equity for debt and focusing mostly on short-term performance such as beating the quarterly earnings estimates. In the first half of 2019, most investors recovered all of their Q4 losses as sentiment shifted and optimism dominated the US-China trade negotiations. Nevertheless, many of the stocks that delivered strong returns in the first half still sport strong fundamentals and their gains were more related to the general market sentiment rather than their individual performance and hedge funds kept their bullish stance. In this article, we will find out how hedge fund sentiment to PG&E Corporation (NYSE:PCG) changed recently.

PG&E Corporation (NYSE:PCG) was in 64 hedge funds' portfolios at the end of the third quarter of 2019. PCG has seen a decrease in hedge fund sentiment of late. There were 67 hedge funds in our database with PCG holdings at the end of the previous quarter. Our calculations also showed that PCG 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).

In the eyes of most stock holders, hedge funds are seen as worthless, old financial vehicles of years past. While there are more than 8000 funds with their doors open at present, Our researchers choose to focus on the leaders of this club, about 750 funds. These money managers watch over most of the hedge fund industry's total capital, and by shadowing their first-class picks, Insider Monkey has deciphered numerous investment strategies that have historically defeated the S&P 500 index. Insider Monkey's flagship short hedge fund strategy outpaced the S&P 500 short ETFs by around 20 percentage points annually since its inception in May 2014. Our portfolio of short stocks lost 27.8% since February 2017 (through November 21st) even though the market was up more than 39% during the same period. We just shared a list of 7 short targets in our latest quarterly update.

[caption id="attachment_338491" align="aligncenter" width="450"] David Abrams of Abrams Capital Management[/caption]

David Abrams

We leave no stone unturned when looking for the next great investment idea. For example 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. 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 is still extremely cheap despite already gaining 20 percent. With all of this in mind, we're going to view the new hedge fund action surrounding PG&E Corporation (NYSE:PCG).

Hedge fund activity in PG&E Corporation (NYSE:PCG)

At Q3's end, a total of 64 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -4% from the second quarter of 2019. Below, you can check out the change in hedge fund sentiment towards PCG over the last 17 quarters. With hedge funds' capital changing hands, there exists an "upper tier" of notable hedge fund managers who were increasing their holdings significantly (or already accumulated large positions).

More specifically, Abrams Capital Management was the largest shareholder of PG&E Corporation (NYSE:PCG), with a stake worth $250 million reported as of the end of September. Trailing Abrams Capital Management was Anchorage Advisors, which amassed a stake valued at $249.1 million. Baupost Group, Appaloosa Management, and Silver Point Capital were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Blue Mountain Capital allocated the biggest weight to PG&E Corporation (NYSE:PCG), around 46.83% of its 13F portfolio. Caspian Capital Partners is also relatively very bullish on the stock, dishing out 26.9 percent of its 13F equity portfolio to PCG.

Judging by the fact that PG&E Corporation (NYSE:PCG) has faced falling interest from hedge fund managers, it's easy to see that there were a few hedge funds that decided to sell off their positions entirely by the end of the third quarter. Intriguingly, James Dinan's York Capital Management sold off the biggest investment of the 750 funds watched by Insider Monkey, worth about $82.7 million in stock. Stanley Druckenmiller's fund, Duquesne Capital, also said goodbye to its stock, about $69.9 million worth. These moves are important to note, as aggregate hedge fund interest fell by 3 funds by the end of the third quarter.

Let's go over hedge fund activity in other stocks - not necessarily in the same industry as PG&E Corporation (NYSE:PCG) but similarly valued. These stocks are NewMarket Corporation (NYSE:NEU), Moderna, Inc. (NASDAQ:MRNA), JBG SMITH Properties (NYSE:JBGS), and Cree, Inc. (NASDAQ:CREE). This group of stocks' market valuations are closest to PCG's market valuation.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position NEU,27,193660,7 MRNA,8,204933,-10 JBGS,19,235290,2 CREE,22,357481,-2 Average,19,247841,-0.75 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 19 hedge funds with bullish positions and the average amount invested in these stocks was $248 million. That figure was $2847 million in PCG's case. NewMarket Corporation (NYSE:NEU) is the most popular stock in this table. On the other hand Moderna, Inc. (NASDAQ:MRNA) is the least popular one with only 8 bullish hedge fund positions. Compared to these stocks PG&E Corporation (NYSE:PCG) is more popular among hedge funds. 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 PCG wasn't nearly as popular as these 20 stocks and hedge funds that were betting on PCG were disappointed as the stock returned -53.9% so far in 2019 (through 12/23) and trailed 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 65 percent of these stocks already outperformed the market in 2019. 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.