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Here’s What Hedge Funds Think About Penske Automotive Group, Inc. (PAG)

Reymerlyn Martin

Hedge funds run by legendary names like George Soros and David Tepper make billions of dollars a year for themselves and their super-rich accredited investors (you’ve got to have a minimum of $1 million liquid to invest in a hedge fund) by spending enormous resources on analyzing and uncovering data about small-cap stocks that the big brokerage houses don’t follow. Small caps are where they can generate significant outperformance. That's why we pay special attention to hedge fund activity in these stocks.

Penske Automotive Group, Inc. (NYSE:PAG) was in 18 hedge funds' portfolios at the end of the first quarter of 2019. PAG has experienced a decrease in activity from the world's largest hedge funds lately. There were 23 hedge funds in our database with PAG positions at the end of the previous quarter. Our calculations also showed that PAG isn't among the 30 most popular stocks among hedge funds.

According to most stock holders, hedge funds are seen as worthless, outdated investment tools of years past. While there are over 8000 funds with their doors open at the moment, We hone in on the aristocrats of this group, about 750 funds. These investment experts watch over bulk of the smart money's total capital, and by tracking their finest equity investments, Insider Monkey has identified numerous investment strategies that have historically beaten the market. Insider Monkey's flagship hedge fund strategy surpassed the S&P 500 index by around 5 percentage points per year since its inception in May 2014 through June 18th. We were able to generate large returns even by identifying short candidates. Our portfolio of short stocks lost 28.2% since February 2017 (through June 18th) even though the market was up nearly 30% during the same period. We just shared a list of 5 short targets in our latest quarterly update and they are already down an average of 8.2% in a month whereas our long picks outperformed the market by 2.5 percentage points in this volatile 5 week period (our long picks also beat the market by 15 percentage points so far this year).

GAMCO Investors, Mario Gabelli

We're going to go over the new hedge fund action surrounding Penske Automotive Group, Inc. (NYSE:PAG).

What have hedge funds been doing with Penske Automotive Group, Inc. (NYSE:PAG)?

At Q1's end, a total of 18 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -22% from one quarter earlier. On the other hand, there were a total of 18 hedge funds with a bullish position in PAG a year ago. With the smart money's positions undergoing their usual ebb and flow, there exists a select group of noteworthy hedge fund managers who were boosting their holdings meaningfully (or already accumulated large positions).

PAG_jun2019

Among these funds, GAMCO Investors held the most valuable stake in Penske Automotive Group, Inc. (NYSE:PAG), which was worth $23.1 million at the end of the first quarter. On the second spot was AQR Capital Management which amassed $12.6 million worth of shares. Moreover, Arrowstreet Capital, Citadel Investment Group, and Royce & Associates were also bullish on Penske Automotive Group, Inc. (NYSE:PAG), allocating a large percentage of their portfolios to this stock.

Seeing as Penske Automotive Group, Inc. (NYSE:PAG) has experienced declining sentiment from the entirety of the hedge funds we track, we can see that there lies a certain "tier" of hedgies who sold off their positions entirely last quarter. It's worth mentioning that Jim Simons's Renaissance Technologies said goodbye to the largest stake of all the hedgies watched by Insider Monkey, totaling close to $6.2 million in stock. Dmitry Balyasny's fund, Balyasny Asset Management, also cut its stock, about $2.5 million worth. These bearish behaviors are important to note, as total hedge fund interest fell by 5 funds last quarter.

Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as Penske Automotive Group, Inc. (NYSE:PAG) but similarly valued. These stocks are Graphic Packaging Holding Company (NYSE:GPK), The Brink's Company (NYSE:BCO), Selective Insurance Group, Inc. (NASDAQ:SIGI), and LiveRamp Holdings, Inc. (NYSE:RAMP). This group of stocks' market values match PAG's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position GPK,24,639511,4 BCO,25,490686,3 SIGI,12,28810,-2 RAMP,23,323059,5 Average,21,370517,2.5 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 21 hedge funds with bullish positions and the average amount invested in these stocks was $371 million. That figure was $71 million in PAG's case. The Brink's Company (NYSE:BCO) is the most popular stock in this table. On the other hand Selective Insurance Group, Inc. (NASDAQ:SIGI) is the least popular one with only 12 bullish hedge fund positions. Penske Automotive Group, Inc. (NYSE:PAG) is not the least popular stock in this group but hedge fund interest is still below average. 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. A small number of hedge funds were also right about betting on PAG, though not to the same extent, as the stock returned 3.8% during the same time frame and outperformed the market as well.

Disclosure: None. This article was originally published at Insider Monkey.

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