World-class money managers like Ken Griffin and Barry Rosenstein only invest their wealthy clients' money after undertaking a rigorous examination of any potential stock. They are particularly successful in this regard when it comes to small-cap stocks, which their peerless research gives them a big information advantage on when it comes to judging their worth. It's not surprising then that they generate their biggest returns from these stocks and invest more of their money in these stocks on average than other investors. It's also not surprising then that we pay close attention to these picks ourselves and have built a market-beating investment strategy around them.
Hedge fund interest in Portland General Electric Company (NYSE:POR) shares was flat at the end of last quarter. This is usually a negative indicator. At the end of this article we will also compare POR to other stocks including Hancock Whitney Corporation (NASDAQ:HWC), The Wendy's Company (NASDAQ:WEN), and AU Optronics Corp. (NYSE:AUO) to get a better sense of its popularity.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds' small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the market by 18 percentage points since May 2014 through December 3, 2018 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren't comfortable with shorting stocks, you should at least avoid initiating long positions in our short portfolio.
Let's take a look at the fresh hedge fund action encompassing Portland General Electric Company (NYSE:POR).
What have hedge funds been doing with Portland General Electric Company (NYSE:POR)?
At the end of the third quarter, a total of 16 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from the second quarter of 2018. The graph below displays the number of hedge funds with bullish position in POR over the last 13 quarters. With hedge funds' sentiment swirling, there exists a few key hedge fund managers who were boosting their stakes substantially (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, Jim Simons's Renaissance Technologies has the biggest position in Portland General Electric Company (NYSE:POR), worth close to $92.2 million, amounting to 0.1% of its total 13F portfolio. The second largest stake is held by GLG Partners, led by Noam Gottesman, holding a $63.5 million position; the fund has 0.2% of its 13F portfolio invested in the stock. Other peers that hold long positions include D. E. Shaw's D E Shaw, Israel Englander's Millennium Management and Dmitry Balyasny's Balyasny Asset Management.
Earlier we told you that the aggregate hedge fund interest in the stock was unchanged and we view this as a negative development. Even though there weren't any hedge funds dumping their holdings during the third quarter, there weren't any hedge funds initiating brand new positions. This indicates that hedge funds, at the very best, perceive this stock as dead money and they haven't identified any viable catalysts that can attract investor attention.
Let's now review hedge fund activity in other stocks - not necessarily in the same industry as Portland General Electric Company (NYSE:POR) but similarly valued. We will take a look at Hancock Whitney Corporation (NASDAQ:HWC), The Wendy's Company (NASDAQ:WEN), AU Optronics Corp. (NYSE:AUO), and Kosmos Energy Ltd (NYSE:KOS). This group of stocks' market caps are closest to POR's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position HWC,24,192263,2 WEN,27,1221248,3 AUO,10,56186,4 KOS,18,199526,3 Average,19.75,417,3 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 19.75 hedge funds with bullish positions and the average amount invested in these stocks was $417 million. That figure was $269 million in POR's case. The Wendy's Company (NASDAQ:WEN) is the most popular stock in this table. On the other hand AU Optronics Corp. (NYSE:AUO) is the least popular one with only 10 bullish hedge fund positions. Portland General Electric Company (NYSE:POR) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we'd rather spend our time researching stocks that hedge funds are piling on. In this regard WEN might be a better candidate to consider a long position.
Disclosure: None. This article was originally published at Insider Monkey.