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 first 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 4.5 years and analyze what the smart money thinks of Park Aerospace Corp. (NYSE:PKE) based on that data and determine whether they were really smart about the stock.
Park Aerospace Corp. (NYSE:PKE) was in 11 hedge funds' portfolios at the end of March. PKE shareholders have witnessed a decrease in hedge fund sentiment of late. There were 13 hedge funds in our database with PKE holdings at the end of the previous quarter. Our calculations also showed that PKE 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In the eyes of most shareholders, hedge funds are assumed to be underperforming, outdated financial vehicles of yesteryear. While there are more than 8000 funds trading today, We hone in on the bigwigs of this group, around 850 funds. These investment experts manage bulk of all hedge funds' total asset base, and by tracking their matchless investments, Insider Monkey has determined various investment strategies that have historically outperformed the broader indices. Insider Monkey's flagship short hedge fund strategy exceeded the S&P 500 short ETFs by around 20 percentage points a year since its inception in March 2017. Our portfolio of short stocks lost 36% since February 2017 (through May 18th) even though the market was up 30% during the same period. We just shared a list of 8 short targets in our latest quarterly update .
[caption id="attachment_339344" align="aligncenter" width="400"] William Martin of Raging Capital Management[/caption]
At Insider Monkey we scour multiple sources to uncover the next great investment idea. There is a lot of volatility in the markets and this presents amazing investment opportunities from time to time. For example, this trader claims to deliver juiced up returns with one trade a week, so we are checking out his highest conviction idea. A second trader claims to score lucrative profits by utilizing a "weekend trading strategy", so we look into his strategy's picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We recently recommended several stocks partly inspired by legendary Bill Miller's investor letter. 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 analyze the fresh hedge fund action encompassing Park Aerospace Corp. (NYSE:PKE).
How are hedge funds trading Park Aerospace Corp. (NYSE:PKE)?
Heading into the second quarter of 2020, a total of 11 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -15% from the fourth quarter of 2019. Below, you can check out the change in hedge fund sentiment towards PKE over the last 18 quarters. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Park Aerospace Corp. (NYSE:PKE) was held by Renaissance Technologies, which reported holding $18.4 million worth of stock at the end of September. It was followed by Raging Capital Management with a $15.9 million position. Other investors bullish on the company included GAMCO Investors, Royce & Associates, and Winton Capital Management. In terms of the portfolio weights assigned to each position Raging Capital Management allocated the biggest weight to Park Aerospace Corp. (NYSE:PKE), around 12.04% of its 13F portfolio. Cove Street Capital is also relatively very bullish on the stock, earmarking 0.21 percent of its 13F equity portfolio to PKE.
Judging by the fact that Park Aerospace Corp. (NYSE:PKE) has experienced a decline in interest from the smart money, it's safe to say that there lies a certain "tier" of funds that decided to sell off their entire stakes in the first quarter. At the top of the heap, C. Jonathan Gattman's Cloverdale Capital Management sold off the biggest investment of all the hedgies followed by Insider Monkey, worth close to $1.7 million in stock. Peter Rathjens, Bruce Clarke and John Campbell's fund, Arrowstreet Capital, also sold off its stock, about $0.3 million worth. These transactions are important to note, as aggregate hedge fund interest dropped by 2 funds in the first quarter.
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Park Aerospace Corp. (NYSE:PKE) but similarly valued. These stocks are TrueCar Inc (NASDAQ:TRUE), Haynes International, Inc. (NASDAQ:HAYN), Koppers Holdings Inc. (NYSE:KOP), and Kraton Corporation (NYSE:KRA). This group of stocks' market valuations match PKE's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position TRUE,12,42497,-3 HAYN,9,33451,-5 KOP,12,9639,-3 KRA,14,22813,-5 Average,11.75,27100,-4 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 11.75 hedge funds with bullish positions and the average amount invested in these stocks was $27 million. That figure was $53 million in PKE's case. Kraton Corporation (NYSE:KRA) is the most popular stock in this table. On the other hand Haynes International, Inc. (NASDAQ:HAYN) is the least popular one with only 9 bullish hedge fund positions. Park Aerospace Corp. (NYSE:PKE) is not the least popular stock in this group but hedge fund interest is still below average. 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 12.3% in 2020 through June 30th and surpassed the market by 15.5 percentage points. Unfortunately PKE wasn't nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); PKE investors were disappointed as the stock returned -11.6% during the second 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.