Many investors, including Paul Tudor Jones or Stan Druckenmiller, have been saying before the Q4 market crash that the stock market is overvalued due to a low interest rate environment that leads to companies swapping their equity for debt and focusing mostly on short-term performance such as beating the quarterly earnings estimates. In the first half of 2019, most investors recovered all of their Q4 losses as sentiment shifted and optimism dominated the US China trade negotiations. Nevertheless, many of the stocks that delivered strong returns in the first half still sport strong fundamentals and their gains were more related to the general market sentiment rather than their individual performance and hedge funds kept their bullish stance. In this article we will find out how hedge fund sentiment to Portland General Electric Company (NYSE:POR) changed recently.
Portland General Electric Company (NYSE:POR) was in 18 hedge funds' portfolios at the end of the second quarter of 2019. POR has seen a decrease in hedge fund sentiment recently. There were 19 hedge funds in our database with POR positions at the end of the previous quarter. Our calculations also showed that POR isn't among the 30 most popular stocks among hedge funds (see the video below). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Why do we pay any attention at all to hedge fund sentiment? 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. Let's take a look at the fresh hedge fund action regarding Portland General Electric Company (NYSE:POR).
What does smart money think about Portland General Electric Company (NYSE:POR)?
Heading into the third quarter of 2019, a total of 18 of the hedge funds tracked by Insider Monkey were long this stock, a change of -5% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards POR over the last 16 quarters. With hedgies' positions undergoing their usual ebb and flow, there exists a few notable hedge fund managers who were upping their stakes significantly (or already accumulated large positions).
Among these funds, Renaissance Technologies held the most valuable stake in Portland General Electric Company (NYSE:POR), which was worth $126.3 million at the end of the second quarter. On the second spot was Carlson Capital which amassed $37.7 million worth of shares. Moreover, GLG Partners, AQR Capital Management, and ExodusPoint Capital were also bullish on Portland General Electric Company (NYSE:POR), allocating a large percentage of their portfolios to this stock.
Seeing as Portland General Electric Company (NYSE:POR) has faced a decline in interest from the smart money, it's easy to see that there was a specific group of hedgies that elected to cut their entire stakes by the end of the second quarter. Intriguingly, Dmitry Balyasny's Balyasny Asset Management dumped the biggest stake of the 750 funds watched by Insider Monkey, valued at about $3.1 million in stock, and Paul Tudor Jones's Tudor Investment Corp was right behind this move, as the fund said goodbye to about $1.7 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest was cut by 1 funds by the end of the second quarter.
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Portland General Electric Company (NYSE:POR) but similarly valued. We will take a look at Nexstar Media Group, Inc. (NASDAQ:NXST), Jabil Inc. (NYSE:JBL), Southwest Gas Corporation (NYSE:SWX), and Armstrong World Industries, Inc. (NYSE:AWI). This group of stocks' market caps are closest to POR's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position NXST,40,1117748,9 JBL,26,315043,6 SWX,16,246360,-4 AWI,30,531242,5 Average,28,552598,4 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 28 hedge funds with bullish positions and the average amount invested in these stocks was $553 million. That figure was $280 million in POR's case. Nexstar Media Group, Inc. (NASDAQ:NXST) is the most popular stock in this table. On the other hand Southwest Gas Corporation (NYSE:SWX) is the least popular one with only 16 bullish hedge fund positions. Portland General Electric Company (NYSE:POR) 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 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. A small number of hedge funds were also right about betting on POR, though not to the same extent, as the stock returned 4.8% during the third quarter and outperformed the market.
Disclosure: None. This article was originally published at Insider Monkey.