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Although the masses and most of the financial media blame hedge funds for their exorbitant fee structure and disappointing performance, these investors have proved to have great stock picking abilities over the years (that's why their assets under management continue to swell). We believe hedge fund sentiment should serve as a crucial tool of an individual investor’s stock selection process, as it may offer great insights of how the brightest minds of the finance industry feel about specific stocks. After all, these people have access to smartest analysts and expensive data/information sources that individual investors can't match. So should one consider investing in The PNC Financial Services Group Inc. (NYSE:PNC)? The smart money sentiment can provide an answer to this question.
Is PNC a good stock to buy? The smart money was becoming less confident. The number of bullish hedge fund positions fell by 15 in recent months. The PNC Financial Services Group Inc. (NYSE:PNC) was in 37 hedge funds' portfolios at the end of September. The all time high for this statistic is 52. Our calculations also showed that PNC 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 financial world there are dozens of indicators stock traders put to use to assess stocks. A duo of the most innovative indicators are hedge fund and insider trading moves. Our researchers have shown that, historically, those who follow the best picks of the best hedge fund managers can beat the S&P 500 by a solid amount (see the details here).
Daniel Sundheim of D1 Capital Partners
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, the House passed a landmark bill decriminalizing marijuana. So, we are checking out this under the radar cannabis stock right now. We go through lists like the 15 best blue chip stocks to buy 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. Now let's take a look at the fresh hedge fund action surrounding The PNC Financial Services Group Inc. (NYSE:PNC).
Do Hedge Funds Think PNC Is A Good Stock To Buy Now?
At third quarter's end, a total of 37 of the hedge funds tracked by Insider Monkey were long this stock, a change of -29% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in PNC over the last 21 quarters. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to Insider Monkey's hedge fund database, D1 Capital Partners, managed by Daniel Sundheim, holds the most valuable position in The PNC Financial Services Group Inc. (NYSE:PNC). D1 Capital Partners has a $353 million position in the stock, comprising 2.1% of its 13F portfolio. The second most bullish fund manager is Berkshire Hathaway, led by Warren Buffett, holding a $211 million position; 0.1% of its 13F portfolio is allocated to the stock. Remaining members of the smart money with similar optimism comprise Ken Griffin's Citadel Investment Group, Mario Gabelli's GAMCO Investors and Emanuel J. Friedman's EJF Capital. In terms of the portfolio weights assigned to each position Hi-Line Capital Management allocated the biggest weight to The PNC Financial Services Group Inc. (NYSE:PNC), around 3.38% of its 13F portfolio. Forest Hill Capital is also relatively very bullish on the stock, earmarking 2.67 percent of its 13F equity portfolio to PNC.
Seeing as The PNC Financial Services Group Inc. (NYSE:PNC) has witnessed falling interest from the entirety of the hedge funds we track, logic holds that there lies a certain "tier" of hedge funds who were dropping their entire stakes last quarter. Intriguingly, Paul Marshall and Ian Wace's Marshall Wace LLP said goodbye to the largest stake of the "upper crust" of funds watched by Insider Monkey, valued at close to $51.6 million in stock, and Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital was right behind this move, as the fund dumped about $35.7 million worth. These transactions are important to note, as total hedge fund interest was cut by 15 funds last quarter.
Let's check out hedge fund activity in other stocks similar to The PNC Financial Services Group Inc. (NYSE:PNC). These stocks are Petroleo Brasileiro S.A. - Petrobras (NYSE:PBR), Ferrari N.V. (NYSE:RACE), Equinor ASA (NYSE:EQNR), TAL Education Group (NYSE:TAL), Spotify Technology S.A. (NYSE:SPOT), Illumina, Inc. (NASDAQ:ILMN), and Atlassian Corporation Plc (NASDAQ:TEAM). This group of stocks' market valuations resemble PNC's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position PBR,31,1006663,2 RACE,31,1322171,6 EQNR,20,324305,10 TAL,41,2136912,1 SPOT,44,1641764,8 ILMN,44,1373332,3 TEAM,48,3228678,-7 Average,37,1576261,3.3 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 37 hedge funds with bullish positions and the average amount invested in these stocks was $1576 million. That figure was $740 million in PNC's case. Atlassian Corporation Plc (NASDAQ:TEAM) is the most popular stock in this table. On the other hand Equinor ASA (NYSE:EQNR) is the least popular one with only 20 bullish hedge fund positions. The PNC Financial Services Group Inc. (NYSE:PNC) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for PNC is 41.7. 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. 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 33.3% in 2020 through December 18th and still beat the market by 16.4 percentage points. A small number of hedge funds were also right about betting on PNC as the stock returned 33.2% since the end of the third quarter (through 12/18) and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.