- Oops!Something went wrong.Please try again later.
We are still in an overall bull market and many stocks that smart money investors were piling into surged through the end of November. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 54% and 51% respectively. Hedge funds' top 3 stock picks returned 41.7% this year and beat the S&P 500 ETFs by 14 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. That's why we believe it isn't a waste of time to check out hedge fund sentiment before you invest in a stock like Park National Corporation (NYSE:PRK).
Park National Corporation (NYSE:PRK) shares haven't seen a lot of action during the third quarter. Overall, hedge fund sentiment was unchanged. The stock was in 8 hedge funds' portfolios at the end of September. The level and the change in hedge fund popularity aren't the only variables you need to analyze to decipher hedge funds' perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That's why at the end of this article we will examine companies such as Chesapeake Utilities Corporation (NYSE:CPK), Safety Insurance Group, Inc. (NASDAQ:SAFT), and James River Group Holdings Ltd (NASDAQ:JRVR) to gather more data points. Our calculations also showed that PRK 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.
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' 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_26073" align="alignnone" width="600"]
Jim Simons of Renaissance Technologies[/caption]
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world's largest cannabis market, so we check out this European marijuana stock pitch. 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 also rely on the best performing hedge funds' buy/sell signals. Let's take a gander at the key hedge fund action encompassing Park National Corporation (NYSE:PRK).
What have hedge funds been doing with Park National Corporation (NYSE:PRK)?
Heading into the fourth quarter of 2019, a total of 8 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the previous quarter. By comparison, 12 hedge funds held shares or bullish call options in PRK a year ago. With hedgies' capital changing hands, there exists a few notable hedge fund managers who were increasing their stakes significantly (or already accumulated large positions).
According to Insider Monkey's hedge fund database, Renaissance Technologies has the most valuable position in Park National Corporation (NYSE:PRK), worth close to $10.4 million, amounting to less than 0.1%% of its total 13F portfolio. Coming in second is Winton Capital Management, led by David Harding, holding a $2.8 million position; less than 0.1%% of its 13F portfolio is allocated to the stock. Some other professional money managers that are bullish consist of Ken Griffin's Citadel Investment Group, Cliff Asness's AQR Capital Management and John Overdeck and David Siegel's Two Sigma Advisors. In terms of the portfolio weights assigned to each position Winton Capital Management allocated the biggest weight to Park National Corporation (NYSE:PRK), around 0.03% of its 13F portfolio. Renaissance Technologies is also relatively very bullish on the stock, setting aside 0.01 percent of its 13F equity portfolio to PRK.
We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Tontine Asset Management. One hedge fund selling its entire position doesn't always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don't think this is the case in this case because only one of the 800+ hedge funds tracked by Insider Monkey identified as a viable investment and initiated a position in the stock (that fund was Paloma Partners).
Let's now review hedge fund activity in other stocks similar to Park National Corporation (NYSE:PRK). We will take a look at Chesapeake Utilities Corporation (NYSE:CPK), Safety Insurance Group, Inc. (NASDAQ:SAFT), James River Group Holdings Ltd (NASDAQ:JRVR), and SunPower Corporation (NASDAQ:SPWR). This group of stocks' market values resemble PRK's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CPK,8,42923,-1 SAFT,9,47348,-1 JRVR,10,52366,0 SPWR,14,105625,4 Average,10.25,62066,0.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 10.25 hedge funds with bullish positions and the average amount invested in these stocks was $62 million. That figure was $15 million in PRK's case. SunPower Corporation (NASDAQ:SPWR) is the most popular stock in this table. On the other hand Chesapeake Utilities Corporation (NYSE:CPK) is the least popular one with only 8 bullish hedge fund positions. Compared to these stocks Park National Corporation (NYSE:PRK) is even less popular than CPK. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. A small number of hedge funds were also right about betting on PRK, though not to the same extent, as the stock returned 6.9% during the fourth quarter (through 11/30) and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.