Hedge Funds Are Dumping Pitney Bowes Inc. (PBI)
In this article we will take a look at whether hedge funds think Pitney Bowes Inc. (NYSE:PBI) is a good investment right now. We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, unconventional data sources, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.
Pitney Bowes Inc. (NYSE:PBI) investors should be aware of a decrease in hedge fund interest of late. PBI was in 15 hedge funds' portfolios at the end of the first quarter of 2020. There were 23 hedge funds in our database with PBI holdings at the end of the previous quarter. Our calculations also showed that PBI 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.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey's monthly stock picks returned 101% since March 2017 and outperformed the S&P 500 ETFs by more than 58 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
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Bill Miller of Miller Value Partners[/caption]
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, blockchain technology's influence will go beyond online payments. So, we are checking out this futurist's moonshot opportunities in tech stocks. We interview hedge fund managers and ask them about their best ideas. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. For example we are checking out stocks recommended/scorned by legendary Bill Miller. 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. Keeping this in mind let's take a look at the recent hedge fund action encompassing Pitney Bowes Inc. (NYSE:PBI).
How are hedge funds trading Pitney Bowes Inc. (NYSE:PBI)?
At Q1's end, a total of 15 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -35% from the previous quarter. By comparison, 24 hedge funds held shares or bullish call options in PBI a year ago. With hedge funds' capital changing hands, there exists an "upper tier" of noteworthy hedge fund managers who were increasing their holdings considerably (or already accumulated large positions).
The largest stake in Pitney Bowes Inc. (NYSE:PBI) was held by Miller Value Partners, which reported holding $10.4 million worth of stock at the end of September. It was followed by Arrowstreet Capital with a $5.7 million position. Other investors bullish on the company included Ellington, D E Shaw, and Royce & Associates. In terms of the portfolio weights assigned to each position Ellington allocated the biggest weight to Pitney Bowes Inc. (NYSE:PBI), around 1.05% of its 13F portfolio. Miller Value Partners is also relatively very bullish on the stock, designating 0.67 percent of its 13F equity portfolio to PBI.
Due to the fact that Pitney Bowes Inc. (NYSE:PBI) has witnessed declining sentiment from hedge fund managers, it's safe to say that there is a sect of hedge funds that decided to sell off their entire stakes last quarter. Intriguingly, Jonathan Soros's JS Capital cut the biggest investment of the "upper crust" of funds followed by Insider Monkey, worth about $0.4 million in stock, and Noam Gottesman's GLG Partners was right behind this move, as the fund cut about $0.4 million worth. These transactions are important to note, as total hedge fund interest was cut by 8 funds last quarter.
Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as Pitney Bowes Inc. (NYSE:PBI) but similarly valued. These stocks are Valhi, Inc. (NYSE:VHI), CytomX Therapeutics, Inc. (NASDAQ:CTMX), Rosetta Stone Inc (NYSE:RST), and Utah Medical Products, Inc. (NASDAQ:UTMD). This group of stocks' market values match PBI's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position VHI,5,1855,-2 CTMX,22,98918,0 RST,22,96350,4 UTMD,6,32769,0 Average,13.75,57473,0.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 13.75 hedge funds with bullish positions and the average amount invested in these stocks was $57 million. That figure was $33 million in PBI's case. CytomX Therapeutics, Inc. (NASDAQ:CTMX) is the most popular stock in this table. On the other hand Valhi, Inc. (NYSE:VHI) is the least popular one with only 5 bullish hedge fund positions. Pitney Bowes Inc. (NYSE:PBI) 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 13.3% in 2020 through June 25th but still beat the market by 16.8 percentage points. Hedge funds were also right about betting on PBI as the stock returned 27.1% in Q2 (through June 25th) 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.
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