Like everyone else, elite investors make mistakes. Some of their top consensus picks, such as Amazon, Facebook and Alibaba, have not done well in Q4 due to various reasons. Nevertheless, the data show elite investors' consensus picks have done well on average over the long-term. The top 20 stocks among hedge funds beat the S&P 500 Index ETF by 4 percentage points so far this year. Because their consensus picks have done well, we pay attention to what elite funds think before doing extensive research on a stock. In this article, we take a closer look at Pitney Bowes Inc. (NYSE:PBI) from the perspective of those elite funds.
Is Pitney Bowes Inc. (NYSE:PBI) a cheap investment right now? The best stock pickers are getting less bullish. The number of long hedge fund positions fell by 6 recently. Our calculations also showed that PBI isn't among the 30 most popular stocks among hedge funds (see the video below). PBI was in 18 hedge funds' portfolios at the end of June. There were 24 hedge funds in our database with PBI positions at the end of the previous quarter. 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 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 25.7% through September 30, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn't rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. We're going to analyze the fresh hedge fund action surrounding Pitney Bowes Inc. (NYSE:PBI).
How have hedgies been trading Pitney Bowes Inc. (NYSE:PBI)?
Heading into the third quarter of 2019, a total of 18 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -25% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in PBI over the last 16 quarters. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Miller Value Partners was the largest shareholder of Pitney Bowes Inc. (NYSE:PBI), with a stake worth $12.5 million reported as of the end of March. Trailing Miller Value Partners was Arrowstreet Capital, which amassed a stake valued at $12.3 million. D E Shaw, Citadel Investment Group, and Two Sigma Advisors were also very fond of the stock, giving the stock large weights in their portfolios.
Since Pitney Bowes Inc. (NYSE:PBI) has experienced a decline in interest from the aggregate hedge fund industry, we can see that there lies a certain "tier" of hedge funds who sold off their entire stakes last quarter. At the top of the heap, Anthony Scaramucci's Skybridge Capital sold off the largest position of the 750 funds followed by Insider Monkey, comprising about $2.5 million in stock. Benjamin A. Smith's fund, Laurion Capital Management, also dropped its stock, about $1.7 million worth. These moves are interesting, as aggregate hedge fund interest was cut by 6 funds last quarter.
Let's check out hedge fund activity in other stocks - not necessarily in the same industry as Pitney Bowes Inc. (NYSE:PBI) but similarly valued. These stocks are Boingo Wireless Inc (NASDAQ:WIFI), Central Securities Corporation (NYSE:CET), Cooper-Standard Holdings Inc (NYSE:CPS), and Monarch Casino & Resort, Inc. (NASDAQ:MCRI). This group of stocks' market valuations match PBI's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position WIFI,14,94487,-3 CET,2,11334,-1 CPS,15,42030,0 MCRI,8,118665,-2 Average,9.75,66629,-1.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 9.75 hedge funds with bullish positions and the average amount invested in these stocks was $67 million. That figure was $68 million in PBI's case. Cooper-Standard Holdings Inc (NYSE:CPS) is the most popular stock in this table. On the other hand Central Securities Corporation (NYSE:CET) is the least popular one with only 2 bullish hedge fund positions. Compared to these stocks Pitney Bowes Inc. (NYSE:PBI) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Hedge funds were also right about betting on PBI as the stock returned 8.3% during Q3 and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.
Disclosure: None. This article was originally published at Insider Monkey.