Before we spend days researching a stock idea we like to take a look at how hedge funds and billionaire investors recently traded that stock. The S&P 500 Index ETF (SPY) lost 2.6% in the first two months of the second quarter. Ten out of 11 industry groups in the S&P 500 Index lost value in May. The average return of a randomly picked stock in the index was even worse (-3.6%). This means you (or a monkey throwing a dart) have less than an even chance of beating the market by randomly picking a stock. On the other hand, the top 20 most popular S&P 500 stocks among hedge funds not only generated positive returns but also outperformed the index by about 3 percentage points through May 30th. In this article, we will take a look at what hedge funds think about Park Electrochemical Corp. (NYSE:PKE).
Park Electrochemical Corp. (NYSE:PKE) shareholders have witnessed an increase in support from the world's most elite money managers in recent months. Our calculations also showed that PKE isn't among the 30 most popular stocks among hedge funds.
Hedge funds' reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn't keep up with the unhedged returns of the market indices. Our research has shown that hedge funds' small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
Let's take a look at the latest hedge fund action surrounding Park Electrochemical Corp. (NYSE:PKE).
Hedge fund activity in Park Electrochemical Corp. (NYSE:PKE)
Heading into the second quarter of 2019, a total of 10 of the hedge funds tracked by Insider Monkey were long this stock, a change of 11% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards PKE over the last 15 quarters. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Raging Capital Management was the largest shareholder of Park Electrochemical Corp. (NYSE:PKE), with a stake worth $27.8 million reported as of the end of March. Trailing Raging Capital Management was Renaissance Technologies, which amassed a stake valued at $24.3 million. GAMCO Investors, Millennium Management, and Winton Capital Management were also very fond of the stock, giving the stock large weights in their portfolios.
Now, some big names have been driving this bullishness. Millennium Management, managed by Israel Englander, initiated the most outsized position in Park Electrochemical Corp. (NYSE:PKE). Millennium Management had $2.4 million invested in the company at the end of the quarter. David Harding's Winton Capital Management also made a $1.4 million investment in the stock during the quarter. The other funds with brand new PKE positions are Cliff Asness's AQR Capital Management and Gavin Saitowitz and Cisco J. del Valle's Springbok Capital.
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Park Electrochemical Corp. (NYSE:PKE) but similarly valued. These stocks are Aduro BioTech Inc (NASDAQ:ADRO), North American Energy Partners Inc. (NYSE:NOA), The Rubicon Project Inc (NYSE:RUBI), and NN, Inc. (NASDAQ:NNBR). This group of stocks' market valuations are closest to PKE's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position ADRO,12,22456,5 NOA,8,51097,0 RUBI,25,61783,3 NNBR,8,46546,0 Average,13.25,45471,2 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 13.25 hedge funds with bullish positions and the average amount invested in these stocks was $45 million. That figure was $72 million in PKE's case. The Rubicon Project Inc (NYSE:RUBI) is the most popular stock in this table. On the other hand North American Energy Partners Inc. (NYSE:NOA) is the least popular one with only 8 bullish hedge fund positions. Park Electrochemical 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 20 most popular stocks among hedge funds returned 6.2% in Q2 through June 19th and outperformed the S&P 500 ETF (SPY) by nearly 3 percentage points. Unfortunately PKE wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); PKE investors were disappointed as the stock returned 3.7% during the same time period 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 13 of these stocks already outperformed the market so far in Q2.
Disclosure: None. This article was originally published at Insider Monkey.