A whopping number of 13F filings filed with U.S. Securities and Exchange Commission has been processed by Insider Monkey so that individual investors can look at the overall hedge fund sentiment towards the stocks included in their watchlists. These freshly-submitted public filings disclose money managers’ equity positions as of the end of the three-month period that ended March 31, so let’s proceed with the discussion of the hedge fund sentiment on Pinnacle West Capital Corporation (NYSE:PNW).
Pinnacle West Capital Corporation (NYSE:PNW) was in 24 hedge funds' portfolios at the end of the first quarter of 2019. PNW has seen a decrease in activity from the world's largest hedge funds in recent months. There were 26 hedge funds in our database with PNW holdings at the end of the previous quarter. Our calculations also showed that PNW 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' 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 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'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 30.9% through May 30, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
We're going to take a look at the latest hedge fund action surrounding Pinnacle West Capital Corporation (NYSE:PNW).
What does the smart money think about Pinnacle West Capital Corporation (NYSE:PNW)?
At Q1's end, a total of 24 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -8% from one quarter earlier. By comparison, 17 hedge funds held shares or bullish call options in PNW a year ago. With hedge funds' sentiment swirling, there exists a few key hedge fund managers who were increasing their holdings substantially (or already accumulated large positions).
More specifically, Renaissance Technologies was the largest shareholder of Pinnacle West Capital Corporation (NYSE:PNW), with a stake worth $257.6 million reported as of the end of March. Trailing Renaissance Technologies was AQR Capital Management, which amassed a stake valued at $222.7 million. Adage Capital Management, Millennium Management, and ExodusPoint Capital were also very fond of the stock, giving the stock large weights in their portfolios.
Since Pinnacle West Capital Corporation (NYSE:PNW) has witnessed a decline in interest from hedge fund managers, it's easy to see that there lies a certain "tier" of fund managers that slashed their full holdings in the third quarter. Intriguingly, Brian Olson, Baehyun Sung, and Jamie Waters's Blackstart Capital dropped the biggest investment of the "upper crust" of funds followed by Insider Monkey, valued at close to $16.1 million in stock. D. E. Shaw's fund, D E Shaw, also dropped its stock, about $15 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest was cut by 2 funds in the third quarter.
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Pinnacle West Capital Corporation (NYSE:PNW) but similarly valued. We will take a look at DexCom, Inc. (NASDAQ:DXCM), Jack Henry & Associates, Inc. (NASDAQ:JKHY), Hasbro, Inc. (NASDAQ:HAS), and PerkinElmer, Inc. (NYSE:PKI). This group of stocks' market caps match PNW's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position DXCM,33,804444,2 JKHY,17,179416,-4 HAS,18,249772,-1 PKI,25,1117960,6 Average,23.25,587898,0.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 23.25 hedge funds with bullish positions and the average amount invested in these stocks was $588 million. That figure was $721 million in PNW's case. DexCom, Inc. (NASDAQ:DXCM) is the most popular stock in this table. On the other hand Jack Henry & Associates, Inc. (NASDAQ:JKHY) is the least popular one with only 17 bullish hedge fund positions. Pinnacle West Capital Corporation (NYSE:PNW) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but 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 1.9% in Q2 through May 30th and outperformed the S&P 500 ETF (SPY) by more than 3 percentage points. Unfortunately PNW wasn't nearly as popular as these 20 stocks and hedge funds that were betting on PNW were disappointed as the stock returned -1.9% during the same 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.