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Our extensive research has shown that imitating the smart money can generate significant returns for retail investors, which is why we track nearly 817 active prominent money managers and analyze their quarterly 13F filings. The stocks that are heavily bought by hedge funds historically outperformed the market, though there is no shortage of high profile failures like hedge funds' 2018 losses in Facebook and Apple. Let’s take a closer look at what the funds we track think about POSCO (NYSE:PKX) in this article.
Is PKX a good stock to buy now? POSCO (NYSE:PKX) shareholders have witnessed an increase in hedge fund interest of late. POSCO (NYSE:PKX) was in 11 hedge funds' portfolios at the end of the third quarter of 2020. The all time high for this statistics is 17. Our calculations also showed that PKX isn't among the 30 most popular stocks among hedge funds (click for Q3 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.
In the 21st century investor’s toolkit there are a multitude of tools stock traders put to use to analyze stocks. Some of the less utilized tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the best picks of the top fund managers can outperform the broader indices by a healthy amount (see the details here).
Cliff Asness of AQR Capital Management
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks to pick the best large-cap stocks to buy. 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 website. With all of this in mind let's check out the new hedge fund action encompassing POSCO (NYSE:PKX).
Do Hedge Funds Think PKX Is A Good Stock To Buy Now?
At third quarter's end, a total of 11 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 10% from the second quarter of 2020. Below, you can check out the change in hedge fund sentiment towards PKX over the last 21 quarters. With hedgies' positions undergoing their usual ebb and flow, there exists an "upper tier" of noteworthy hedge fund managers who were upping their stakes significantly (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, Richard S. Pzena's Pzena Investment Management has the most valuable position in POSCO (NYSE:PKX), worth close to $43.6 million, corresponding to 0.3% of its total 13F portfolio. The second most bullish fund manager is Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, which holds a $35.3 million position; the fund has 0.1% of its 13F portfolio invested in the stock. Some other hedge funds and institutional investors that are bullish consist of D. E. Shaw's D E Shaw, Ken Griffin's Citadel Investment Group and Ronald Hua's Qtron Investments. In terms of the portfolio weights assigned to each position Chou Associates Management allocated the biggest weight to POSCO (NYSE:PKX), around 0.84% of its 13F portfolio. Qtron Investments is also relatively very bullish on the stock, earmarking 0.43 percent of its 13F equity portfolio to PKX.
Consequently, key money managers have been driving this bullishness. Ovata Capital Management, managed by James Chen, initiated the largest position in POSCO (NYSE:PKX). Ovata Capital Management had $0.6 million invested in the company at the end of the quarter. Ryan Tolkin (CIO)'s Schonfeld Strategic Advisors also initiated a $0.5 million position during the quarter. The only other fund with a new position in the stock is Cliff Asness's AQR Capital Management.
Let's check out hedge fund activity in other stocks similar to POSCO (NYSE:PKX). These stocks are J.B. Hunt Transport Services, Inc. (NASDAQ:JBHT), HubSpot Inc (NYSE:HUBS), Mid America Apartment Communities Inc (NYSE:MAA), Hartford Financial Services Group Inc (NYSE:HIG), Teradyne, Inc. (NYSE:TER), Elanco Animal Health Incorporated (NYSE:ELAN), and Tradeweb Markets Inc. (NASDAQ:TW). This group of stocks' market values are similar to PKX's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position JBHT,38,329247,14 HUBS,40,1187421,-1 MAA,27,449666,-3 HIG,36,966601,-3 TER,42,1365348,8 ELAN,21,302734,-9 TW,24,297199,-9 Average,32.6,699745,-0.4 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 32.6 hedge funds with bullish positions and the average amount invested in these stocks was $700 million. That figure was $87 million in PKX's case. Teradyne, Inc. (NYSE:TER) is the most popular stock in this table. On the other hand Elanco Animal Health Incorporated (NYSE:ELAN) is the least popular one with only 21 bullish hedge fund positions. Compared to these stocks POSCO (NYSE:PKX) is even less popular than ELAN. Our overall hedge fund sentiment score for PKX is 25.4. 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. Hedge funds clearly dropped the ball on PKX as the stock delivered strong returns, though hedge funds' consensus picks still generated respectable returns. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 32.9% in 2020 through December 8th and still beat the market by 16.2 percentage points. A small number of hedge funds were also right about betting on PKX as the stock returned 46.2% since Q3 (through December 8th) and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.