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After several tireless days we have finished crunching the numbers from nearly 750 13F filings issued by the elite hedge funds and other investment firms that we track at Insider Monkey, which disclosed those firms' equity portfolios as of September 30th. The results of that effort will be put on display in this article, as we share valuable insight into the smart money sentiment towards POSCO (NYSE:PKX).
POSCO (NYSE:PKX) was in 9 hedge funds' portfolios at the end of the third quarter of 2019. PKX has experienced a decrease in activity from the world's largest hedge funds of late. There were 12 hedge funds in our database with PKX positions at the end of the previous quarter. Our calculations also showed that PKX isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
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 Russell 2000 ETFs by 40 percentage points since May 2014 (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 27.8% through November 21, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
[caption id="attachment_338852" align="alignnone" width="2480"]
Richard S. Pzena of Pzena Investment Management[/caption]
We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We even check out this option genius’ weekly trade ideas. This December we recommended Adams Energy based on an under-the-radar fund manager’s investor letter and the stock gained 20 percent. We're going to view the new hedge fund action surrounding POSCO (NYSE:PKX).
What have hedge funds been doing with POSCO (NYSE:PKX)?
At the end of the third quarter, a total of 9 of the hedge funds tracked by Insider Monkey were long this stock, a change of -25% from one quarter earlier. On the other hand, there were a total of 14 hedge funds with a bullish position in PKX a year ago. With hedge funds' capital changing hands, there exists an "upper tier" of notable hedge fund managers who were increasing their holdings considerably (or already accumulated large positions).
Among these funds, Arrowstreet Capital held the most valuable stake in POSCO (NYSE:PKX), which was worth $21.2 million at the end of the third quarter. On the second spot was Pzena Investment Management which amassed $8.9 million worth of shares. Point72 Asset Management, D E Shaw, and Chou Associates Management were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Chou Associates Management allocated the biggest weight to POSCO (NYSE:PKX), around 0.6% of its 13F portfolio. Factorial Partners is also relatively very bullish on the stock, dishing out 0.3 percent of its 13F equity portfolio to PKX.
Since POSCO (NYSE:PKX) has faced declining sentiment from the entirety of the hedge funds we track, it's easy to see that there was a specific group of hedgies that slashed their positions entirely last quarter. At the top of the heap, Israel Englander's Millennium Management dropped the largest stake of the 750 funds followed by Insider Monkey, comprising close to $8.7 million in stock, and David Kowitz and Sheldon Kasowitz's Indus Capital was right behind this move, as the fund said goodbye to about $0.7 million worth. These moves are interesting, as total hedge fund interest was cut by 3 funds last quarter.
Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as POSCO (NYSE:PKX) but similarly valued. These stocks are Plains All American Pipeline, L.P. (NYSE:PAA), Extra Space Storage, Inc. (NYSE:EXR), Hasbro, Inc. (NASDAQ:HAS), and Akamai Technologies, Inc. (NASDAQ:AKAM). This group of stocks' market caps are closest to PKX's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position PAA,15,127854,4 EXR,27,328929,7 HAS,29,431855,5 AKAM,27,810658,-6 Average,24.5,424824,2.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 24.5 hedge funds with bullish positions and the average amount invested in these stocks was $425 million. That figure was $46 million in PKX's case. Hasbro, Inc. (NASDAQ:HAS) is the most popular stock in this table. On the other hand Plains All American Pipeline, L.P. (NYSE:PAA) is the least popular one with only 15 bullish hedge fund positions. Compared to these stocks POSCO (NYSE:PKX) is even less popular than PAA. Hedge funds dodged a bullet by taking a bearish stance towards PKX. Our calculations showed that the top 20 most popular hedge fund stocks returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately PKX wasn't nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); PKX investors were disappointed as the stock returned 2% during the fourth quarter (through the end of November) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as 70 percent of these stocks already outperformed the market so far in Q4.
Disclosure: None. This article was originally published at Insider Monkey.