The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 823 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds' and investors' portfolio positions as of June 30th, when the S&P 500 Index was trading around the 3100 level. Stocks kept going up since then. In this article we look at how hedge funds traded PS Business Parks Inc (NYSE:PSB) and determine whether the smart money was really smart about this stock.
PS Business Parks Inc (NYSE:PSB) investors should be aware of an increase in activity from the world's largest hedge funds recently. PS Business Parks Inc (NYSE:PSB) was in 20 hedge funds' portfolios at the end of the second quarter of 2020. The all time high for this statistics is 19. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that PSB 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). 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 56 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.
Dmitry Balyasny of Balyasny Asset Management
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers after its stock price crashed. 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. Now we're going to take a peek at the key hedge fund action encompassing PS Business Parks Inc (NYSE:PSB).
What have hedge funds been doing with PS Business Parks Inc (NYSE:PSB)?
Heading into the third quarter of 2020, a total of 20 of the hedge funds tracked by Insider Monkey were long this stock, a change of 18% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards PSB over the last 20 quarters. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in PS Business Parks Inc (NYSE:PSB) was held by Echo Street Capital Management, which reported holding $23.8 million worth of stock at the end of September. It was followed by Osterweis Capital Management with a $22.1 million position. Other investors bullish on the company included Citadel Investment Group, GLG Partners, and Balyasny Asset Management. In terms of the portfolio weights assigned to each position Osterweis Capital Management allocated the biggest weight to PS Business Parks Inc (NYSE:PSB), around 1.6% of its 13F portfolio. Wexford Capital is also relatively very bullish on the stock, setting aside 0.29 percent of its 13F equity portfolio to PSB.
Consequently, some big names were breaking ground themselves. Osterweis Capital Management, managed by John Osterweis, created the biggest position in PS Business Parks Inc (NYSE:PSB). Osterweis Capital Management had $22.1 million invested in the company at the end of the quarter. Charles Davidson and Joseph Jacobs's Wexford Capital also made a $1.2 million investment in the stock during the quarter. The following funds were also among the new PSB investors: Parvinder Thiara's Athanor Capital, Michael Gelband's ExodusPoint Capital, and Thomas Bailard's Bailard Inc.
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as PS Business Parks Inc (NYSE:PSB) but similarly valued. These stocks are Emcor Group Inc (NYSE:EME), FibroGen Inc (NASDAQ:FGEN), Cirrus Logic, Inc. (NASDAQ:CRUS), Silgan Holdings Inc. (NASDAQ:SLGN), Spirit Realty Capital Inc (NYSE:SRC), United Bankshares, Inc. (NASDAQ:UBSI), and Equitrans Midstream Corporation (NYSE:ETRN). All of these stocks' market caps resemble PSB's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position EME,29,191491,5 FGEN,25,310554,3 CRUS,33,315676,5 SLGN,19,183360,3 SRC,18,154998,0 UBSI,16,44023,3 ETRN,29,465675,10 Average,24.1,237968,4.1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 24.1 hedge funds with bullish positions and the average amount invested in these stocks was $238 million. That figure was $123 million in PSB's case. Cirrus Logic, Inc. (NASDAQ:CRUS) is the most popular stock in this table. On the other hand United Bankshares, Inc. (NASDAQ:UBSI) is the least popular one with only 16 bullish hedge fund positions. PS Business Parks Inc (NYSE:PSB) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for PSB is 38. 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. This is a slightly negative signal and we'd rather spend our time researching stocks that hedge funds are piling on. 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 24.8% in 2020 through the end of September and surpassed the market by 19.3 percentage points. Unfortunately PSB wasn't nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); PSB investors were disappointed as the stock returned -6.8% in the third quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
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Disclosure: None. This article was originally published at Insider Monkey.