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Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds' and successful investors' positions as of the end of the second quarter. You can find articles about an individual hedge fund's trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 5 years and analyze what the smart money thinks of Packaging Corporation Of America (NYSE:PKG) based on that data and determine whether they were really smart about the stock.
Is Packaging Corporation Of America (NYSE:PKG) ready to rally soon? Hedge funds were buying. The number of long hedge fund bets went up by 2 in recent months. Packaging Corporation Of America (NYSE:PKG) was in 25 hedge funds' portfolios at the end of the second quarter of 2020. The all time high for this statistics is 33. Our calculations also showed that PKG isn't among the 30 most popular stocks among hedge funds (click for Q2 rankings and see the video for a quick look at the top 5 stocks). There were 23 hedge funds in our database with PKG positions at the end of the first quarter.
Video: Watch our video about the top 5 most popular hedge fund stocks.
Hedge funds' reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn't keep up with the unhedged returns of the market indices. 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 S&P 500 ETFs by 58 percentage points since March 2017 (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.
Donald Sussman of Paloma Partners
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, legal marijuana is one of the fastest growing industries right now, so we are checking out stock pitches like “the Starbucks of cannabis” to identify the next tenbagger. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website to get excerpts of these letters in your inbox. With all of this in mind let's take a look at the latest hedge fund action encompassing Packaging Corporation Of America (NYSE:PKG).
How have hedgies been trading Packaging Corporation Of America (NYSE:PKG)?
Heading into the third quarter of 2020, a total of 25 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 9% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards PKG over the last 20 quarters. With the smart money's positions undergoing their usual ebb and flow, there exists a select group of noteworthy hedge fund managers who were upping their stakes significantly (or already accumulated large positions).
The largest stake in Packaging Corporation Of America (NYSE:PKG) was held by AQR Capital Management, which reported holding $48 million worth of stock at the end of September. It was followed by Marshall Wace LLP with a $19.3 million position. Other investors bullish on the company included Royce & Associates, Citadel Investment Group, and Alyeska Investment Group. In terms of the portfolio weights assigned to each position Quantinno Capital allocated the biggest weight to Packaging Corporation Of America (NYSE:PKG), around 0.32% of its 13F portfolio. Marshall Wace LLP is also relatively very bullish on the stock, dishing out 0.14 percent of its 13F equity portfolio to PKG.
With a general bullishness amongst the heavyweights, key hedge funds have been driving this bullishness. Alyeska Investment Group, managed by Anand Parekh, established the biggest position in Packaging Corporation Of America (NYSE:PKG). Alyeska Investment Group had $4.1 million invested in the company at the end of the quarter. Donald Sussman's Paloma Partners also made a $1.6 million investment in the stock during the quarter. The other funds with new positions in the stock are Ben Levine, Andrew Manuel and Stefan Renold's LMR Partners, Lee Ainslie's Maverick Capital, and Ryan Tolkin (CIO)'s Schonfeld Strategic Advisors.
Let's now review hedge fund activity in other stocks similar to Packaging Corporation Of America (NYSE:PKG). These stocks are Eastman Chemical Company (NYSE:EMN), Raymond James Financial, Inc. (NYSE:RJF), Allegion plc (NYSE:ALLE), Quidel Corporation (NASDAQ:QDEL), CenterPoint Energy, Inc. (NYSE:CNP), Annaly Capital Management, Inc. (NYSE:NLY), and PPD, Inc. (NASDAQ:PPD). All of these stocks' market caps are similar to PKG's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position EMN,27,184901,-2 RJF,35,436156,4 ALLE,29,424856,-2 QDEL,32,282861,10 CNP,30,480314,-2 NLY,21,288668,-6 PPD,27,620340,0 Average,28.7,388299,0.3 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 28.7 hedge funds with bullish positions and the average amount invested in these stocks was $388 million. That figure was $101 million in PKG's case. Raymond James Financial, Inc. (NYSE:RJF) is the most popular stock in this table. On the other hand Annaly Capital Management, Inc. (NYSE:NLY) is the least popular one with only 21 bullish hedge fund positions. Packaging Corporation Of America (NYSE:PKG) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for PKG is 44. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. 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 21.3% in 2020 through September 25th and still beat the market by 17.7 percentage points. A small number of hedge funds were also right about betting on PKG as the stock returned 10.5% since the end of June (through September 25th) and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.