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In this article we will check out the progression of hedge fund sentiment towards Par Pacific Holdings, Inc. (NYSE:PARR) and determine whether it is a good investment right now. We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also employ numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.
Hedge fund interest in Par Pacific Holdings, Inc. (NYSE:PARR) shares was flat at the end of last quarter. This is usually a negative indicator. At the end of this article we will also compare PARR to other stocks including Independence Holding Company (NYSE:IHC), Hawkins, Inc. (NASDAQ:HWKN), and Switchback Energy Acquisition Corporation (NYSE:SBE) to get a better sense of its popularity.
Video: Watch our video about the top 5 most popular hedge fund stocks.
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 S&P 500 ETFs by more than 58 percentage points since March 2017 (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 stocks that are in our short portfolio.
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Andy Redleaf of Whitebox Advisors[/caption]
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now let's analyze the recent hedge fund action encompassing Par Pacific Holdings, Inc. (NYSE:PARR).
What does smart money think about Par Pacific Holdings, Inc. (NYSE:PARR)?
At Q1's end, a total of 18 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in PARR over the last 18 quarters. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Renaissance Technologies held the most valuable stake in Par Pacific Holdings, Inc. (NYSE:PARR), which was worth $18.3 million at the end of the third quarter. On the second spot was Park West Asset Management which amassed $14.5 million worth of shares. Birch Run Capital, Whitebox Advisors, and Marshall Wace LLP 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 Birch Run Capital allocated the biggest weight to Par Pacific Holdings, Inc. (NYSE:PARR), around 5.4% of its 13F portfolio. Yaupon Capital is also relatively very bullish on the stock, earmarking 1.42 percent of its 13F equity portfolio to PARR.
Seeing as Par Pacific Holdings, Inc. (NYSE:PARR) has faced a decline in interest from the smart money, logic holds that there lies a certain "tier" of money managers who were dropping their entire stakes by the end of the first quarter. At the top of the heap, Israel Englander's Millennium Management cut the largest position of all the hedgies tracked by Insider Monkey, totaling close to $9.7 million in stock. Leon Cooperman's fund, Omega Advisors, also said goodbye to its stock, about $2.3 million worth. These moves are interesting, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Let's check out hedge fund activity in other stocks - not necessarily in the same industry as Par Pacific Holdings, Inc. (NYSE:PARR) but similarly valued. We will take a look at Independence Holding Company (NYSE:IHC), Hawkins, Inc. (NASDAQ:HWKN), Switchback Energy Acquisition Corporation (NYSE:SBE), and Yiren Digital Ltd. (NYSE:YRD). This group of stocks' market caps are closest to PARR's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position IHC,2,13618,-3 HWKN,5,8259,-3 SBE,15,95680,-1 YRD,2,2472,-3 Average,6,30007,-2.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 6 hedge funds with bullish positions and the average amount invested in these stocks was $30 million. That figure was $49 million in PARR's case. Switchback Energy Acquisition Corporation (NYSE:SBE) is the most popular stock in this table. On the other hand Independence Holding Company (NYSE:IHC) is the least popular one with only 2 bullish hedge fund positions. Compared to these stocks Par Pacific Holdings, Inc. (NYSE:PARR) is more popular among hedge funds. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks returned 13.4% in 2020 through June 22nd but still managed to beat the market by 15.9 percentage points. Hedge funds were also right about betting on PARR as the stock returned 31.8% so far in Q2 (through June 22nd) 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.