Before we spend countless hours researching a company, we'd like to analyze what insiders, hedge funds and billionaire investors think of the stock first. We would like to do so because our research has shown that the elite investors' consensus returns have been exceptional. In the following paragraphs, we find out what the billionaire investors and hedge funds think of Pampa Energia S.A. (NYSE:PAM).
Pampa Energia S.A. (NYSE:PAM) shares haven't seen a lot of action during the third quarter. Overall, hedge fund sentiment was unchanged. The stock was in 15 hedge funds' portfolios at the end of the fourth quarter of 2018. The level and the change in hedge fund popularity aren't the only variables you need to analyze to decipher hedge funds' perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That's why at the end of this article we will examine companies such as Range Resources Corp. (NYSE:RRC), Premier Inc (NASDAQ:PINC), and South Jersey Industries Inc (NYSE:SJI) to gather more data points.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds' small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the market by 32 percentage points since May 2014 through March 12, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren't comfortable with shorting stocks, you should at least avoid initiating long positions in our short portfolio.
Let's analyze the new hedge fund action regarding Pampa Energia S.A. (NYSE:PAM).
Hedge fund activity in Pampa Energia S.A. (NYSE:PAM)
Heading into the first quarter of 2019, a total of 15 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the previous quarter. On the other hand, there were a total of 16 hedge funds with a bullish position in PAM a year ago. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Pampa Energia S.A. (NYSE:PAM) was held by Point State Capital, which reported holding $160.7 million worth of stock at the end of December. It was followed by OZ Management with a $60.5 million position. Other investors bullish on the company included Serengeti Asset Management, Oaktree Capital Management, and Columbus Hill Capital Management.
Seeing as Pampa Energia S.A. (NYSE:PAM) has witnessed a decline in interest from hedge fund managers, logic holds that there lies a certain "tier" of hedgies that slashed their full holdings heading into Q3. At the top of the heap, Steve Cohen's Point72 Asset Management dropped the largest position of the 700 funds monitored by Insider Monkey, comprising about $8.6 million in stock. Hugh Sloane's fund, Sloane Robinson Investment Management, also said goodbye to its stock, about $6.8 million worth. These transactions are interesting, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).
Let's now review hedge fund activity in other stocks similar to Pampa Energia S.A. (NYSE:PAM). These stocks are Range Resources Corp. (NYSE:RRC), Premier Inc (NASDAQ:PINC), South Jersey Industries Inc (NYSE:SJI), and Brookfield Property REIT Inc. (NASDAQ:BPR). This group of stocks' market valuations match PAM's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position RRC,31,724194,2 PINC,18,181570,-3 SJI,12,70335,-2 BPR,14,143546,-6 Average,18.75,279911,-2.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 18.75 hedge funds with bullish positions and the average amount invested in these stocks was $280 million. That figure was $295 million in PAM's case. Range Resources Corp. (NYSE:RRC) is the most popular stock in this table. On the other hand South Jersey Industries Inc (NYSE:SJI) is the least popular one with only 12 bullish hedge fund positions. Pampa Energia S.A. (NYSE:PAM) is not the least popular stock in this group but hedge fund interest is still below average. 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 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. Unfortunately PAM wasn't nearly as popular as these 15 stock (hedge fund sentiment was quite bearish); PAM investors were disappointed as the stock returned -26% and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 15 most popular stocks) among hedge funds as 13 of these stocks already outperformed the market this year.
Disclosure: None. This article was originally published at Insider Monkey.