At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (Recession is Imminent: We Need A Travel Ban NOW). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards Pinnacle West Capital Corporation (NYSE:PNW).
Pinnacle West Capital Corporation (NYSE:PNW) shares haven't seen a lot of action during the first quarter. Overall, hedge fund sentiment was unchanged. The stock was in 25 hedge funds' portfolios at the end of the first quarter of 2020. 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 Cheniere Energy, Inc. (NYSE:LNG), Molina Healthcare, Inc. (NYSE:MOH), and Avery Dennison Corporation (NYSE:AVY) to gather more data points. Our calculations also showed that PNW isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks). Video: Watch our video about the top 5 most popular hedge fund stocks.
At the moment there are a large number of signals stock traders put to use to value stocks. A couple of the most under-the-radar signals are hedge fund and insider trading interest. Our experts have shown that, historically, those who follow the best picks of the best investment managers can outclass the S&P 500 by a superb margin (see the details here).
[caption id="attachment_747404" align="aligncenter" width="398"] Stuart Zimmer of Zimmer Partners[/caption]
We leave no stone unturned when looking for the next great investment idea. For example, we believe electric vehicles and energy storage are set to become giant markets, and we want to take advantage of the declining lithium prices amid the COVID-19 pandemic. So we are checking out investment opportunities like these. 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. Keeping this in mind let's review the key hedge fund action regarding Pinnacle West Capital Corporation (NYSE:PNW).
Hedge fund activity in Pinnacle West Capital Corporation (NYSE:PNW)
At the end of the first quarter, a total of 25 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from one quarter earlier. By comparison, 24 hedge funds held shares or bullish call options in PNW a year ago. So, let's see 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 Pinnacle West Capital Corporation (NYSE:PNW), which was worth $246.5 million at the end of the third quarter. On the second spot was AQR Capital Management which amassed $202.1 million worth of shares. Zimmer Partners, Citadel Investment Group, and Electron Capital Partners 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 Electron Capital Partners allocated the biggest weight to Pinnacle West Capital Corporation (NYSE:PNW), around 10.06% of its 13F portfolio. Blackstart Capital is also relatively very bullish on the stock, designating 6.75 percent of its 13F equity portfolio to PNW.
Because Pinnacle West Capital Corporation (NYSE:PNW) has experienced bearish sentiment from the aggregate hedge fund industry, logic holds that there was a specific group of fund managers that elected to cut their entire stakes heading into Q4. Intriguingly, Dmitry Balyasny's Balyasny Asset Management sold off the biggest position of all the hedgies watched by Insider Monkey, worth an estimated $1.4 million in stock. Jinghua Yan's fund, TwinBeech Capital, also sold off its stock, about $0.8 million worth. These bearish behaviors 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 review hedge fund activity in other stocks - not necessarily in the same industry as Pinnacle West Capital Corporation (NYSE:PNW) but similarly valued. We will take a look at Cheniere Energy, Inc. (NYSE:LNG), Molina Healthcare, Inc. (NYSE:MOH), Avery Dennison Corporation (NYSE:AVY), and Huazhu Group Limited (NASDAQ:HTHT). This group of stocks' market values are closest to PNW's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position LNG,39,1880676,-4 MOH,32,1223084,-3 AVY,18,82899,-4 HTHT,17,255677,-1 Average,26.5,860584,-3 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 26.5 hedge funds with bullish positions and the average amount invested in these stocks was $861 million. That figure was $923 million in PNW's case. Cheniere Energy, Inc. (NYSE:LNG) is the most popular stock in this table. On the other hand Huazhu Group Limited (NASDAQ:HTHT) is the least popular one with only 17 bullish hedge fund positions. Pinnacle West Capital Corporation (NYSE:PNW) 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 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 gained 13.9% in 2020 through June 10th and surpassed the market by 14.2 percentage points. Unfortunately PNW wasn't nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); PNW investors were disappointed as the stock returned 4.1% during the second quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
Disclosure: None. This article was originally published at Insider Monkey.