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Many prominent investors, including Warren Buffett, David Tepper and Stan Druckenmiller, have been cautious regarding the current bull market and missed out as the stock market reached another high in recent weeks. On the other hand, technology hedge funds weren't timid and registered double digit market beating gains. Financials, energy and industrial stocks initially suffered the most but many of these stocks delivered strong returns since November and hedge funds actually increased their positions in these stocks. In this article we will find out how hedge fund sentiment towards PACCAR Inc (NASDAQ:PCAR) changed recently.
Hedge fund interest in PACCAR Inc (NASDAQ:PCAR) shares was flat at the end of last quarter. This is usually a negative indicator. Our calculations also showed that PCAR isn't among the 30 most popular stocks among hedge funds (click for Q2 rankings). At the end of this article we will also compare PCAR to other stocks including AMETEK, Inc. (NYSE:AME), Unity Software Inc. (NYSE:U), and MPLX LP (NYSE:MPLX) to get a better sense of its popularity.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey's monthly stock picks returned 185.4% since March 2017 and outperformed the S&P 500 ETFs by more than 79 percentage points (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
David E. Shaw of D.E. Shaw
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. With all of this in mind let's review the recent hedge fund action encompassing PACCAR Inc (NASDAQ:PCAR).
Do Hedge Funds Think PCAR Is A Good Stock To Buy Now?
At the end of the second quarter, a total of 28 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from one quarter earlier. By comparison, 30 hedge funds held shares or bullish call options in PCAR a year ago. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Citadel Investment Group held the most valuable stake in PACCAR Inc (NASDAQ:PCAR), which was worth $183 million at the end of the second quarter. On the second spot was AQR Capital Management which amassed $114.2 million worth of shares. Millennium Management, D E Shaw, and Renaissance Technologies were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Neo Ivy Capital allocated the biggest weight to PACCAR Inc (NASDAQ:PCAR), around 0.86% of its 13F portfolio. AlphaCrest Capital Management is also relatively very bullish on the stock, dishing out 0.3 percent of its 13F equity portfolio to PCAR.
Due to the fact that PACCAR Inc (NASDAQ:PCAR) has witnessed a decline in interest from the entirety of the hedge funds we track, it's safe to say that there were a few money managers that elected to cut their positions entirely heading into Q3. Interestingly, Jinghua Yan's TwinBeech Capital dropped the biggest investment of the 750 funds monitored by Insider Monkey, comprising close to $4.2 million in stock. Alec Litowitz and Ross Laser's fund, Magnetar Capital, also sold off its stock, about $4.1 million worth. These transactions are intriguing to say the least, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Let's now take a look at hedge fund activity in other stocks similar to PACCAR Inc (NASDAQ:PCAR). These stocks are AMETEK, Inc. (NYSE:AME), Unity Software Inc. (NYSE:U), MPLX LP (NYSE:MPLX), Orange SA (NYSE:ORAN), TELUS Corporation (NYSE:TU), Zillow Group Inc (NASDAQ:Z), and ANSYS, Inc. (NASDAQ:ANSS). This group of stocks' market valuations are closest to PCAR's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position AME,38,912985,6 U,29,7263688,-10 MPLX,11,115640,3 ORAN,3,13039,1 TU,13,215295,-5 Z,76,5243852,-6 ANSS,46,1459350,13 Average,30.9,2174836,0.3 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 30.9 hedge funds with bullish positions and the average amount invested in these stocks was $2175 million. That figure was $624 million in PCAR's case. Zillow Group Inc (NASDAQ:Z) is the most popular stock in this table. On the other hand Orange SA (NYSE:ORAN) is the least popular one with only 3 bullish hedge fund positions. PACCAR Inc (NASDAQ:PCAR) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for PCAR is 44.2. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. This is a slightly negative signal and we'd rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 24.9% in 2021 through October 15th and surpassed the market again by 4.5 percentage points. Unfortunately PCAR wasn't nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); PCAR investors were disappointed as the stock returned -2.2% since the end of June (through 10/15) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2021.
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Disclosure: None. This article was originally published at Insider Monkey.