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. Insider Monkey finished processing more than 730 13F filings submitted by hedge funds and prominent investors. These filings show these funds' portfolio positions as of June 28th, 2019. In this article we are going to take a look at smart money sentiment towards Pentair plc (NYSE:PNR).
Is Pentair plc (NYSE:PNR) the right investment to pursue these days? The best stock pickers are getting less bullish. The number of long hedge fund positions decreased by 7 in recent months. Our calculations also showed that PNR isn't among the 30 most popular stocks among hedge funds (see the video below). PNR was in 21 hedge funds' portfolios at the end of the second quarter of 2019. There were 28 hedge funds in our database with PNR positions at the end of the previous quarter. Overall hedge fund sentiment is still quite bullish though. Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds' large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 25.7% through September 30, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn't rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. Let's review the recent hedge fund action encompassing Pentair plc (NYSE:PNR).
What does smart money think about Pentair plc (NYSE:PNR)?
At the end of the second quarter, a total of 21 of the hedge funds tracked by Insider Monkey were long this stock, a change of -25% from the previous quarter. On the other hand, there were a total of 23 hedge funds with a bullish position in PNR a year ago. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to Insider Monkey's hedge fund database, Ian Simm's Impax Asset Management has the biggest position in Pentair plc (NYSE:PNR), worth close to $259.1 million, amounting to 3.4% of its total 13F portfolio. Coming in second is Citadel Investment Group, led by Ken Griffin, holding a $137 million position; the fund has 0.1% of its 13F portfolio invested in the stock. Remaining members of the smart money with similar optimism contain Dmitry Balyasny's Balyasny Asset Management, Cliff Asness's AQR Capital Management and Paul Marshall and Ian Wace's Marshall Wace LLP.
Judging by the fact that Pentair plc (NYSE:PNR) has faced declining sentiment from the aggregate hedge fund industry, logic holds that there is a sect of money managers that slashed their entire stakes in the second quarter. At the top of the heap, Alexander Mitchell's Scopus Asset Management dropped the largest stake of the "upper crust" of funds watched by Insider Monkey, totaling about $19.1 million in stock. Peter Rathjens, Bruce Clarke and John Campbell's fund, Arrowstreet Capital, also sold off its stock, about $13 million worth. These transactions are intriguing to say the least, as total hedge fund interest dropped by 7 funds in the second quarter.
Let's go over hedge fund activity in other stocks similar to Pentair plc (NYSE:PNR). We will take a look at Donaldson Company, Inc. (NYSE:DCI), Gerdau SA (NYSE:GGB), Exelixis, Inc. (NASDAQ:EXEL), and New Residential Investment Corp (NYSE:NRZ). This group of stocks' market values are closest to PNR's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position DCI,16,152244,0 GGB,7,117146,-3 EXEL,21,808994,-3 NRZ,16,155738,-2 Average,15,308531,-2 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 15 hedge funds with bullish positions and the average amount invested in these stocks was $309 million. That figure was $546 million in PNR's case. Exelixis, Inc. (NASDAQ:EXEL) is the most popular stock in this table. On the other hand Gerdau SA (NYSE:GGB) is the least popular one with only 7 bullish hedge fund positions. Pentair plc (NYSE:PNR) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Hedge funds were also right about betting on PNR, though not to the same extent, as the stock returned 2.1% during the third quarter and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.