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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 stock a buy? The PNC Financial Services Group Inc. (NYSE:PNC) has experienced a decrease in activity from the world's largest hedge funds of late. The PNC Financial Services Group Inc. (NYSE:PNC) was in 35 hedge funds' portfolios at the end of the fourth quarter of 2020. 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 Q4 rankings).
Today there are a large number of metrics shareholders can use to appraise publicly traded companies. Two of the less known metrics are hedge fund and insider trading signals. We have shown that, historically, those who follow the best picks of the best money managers can outpace the market by a solid margin (see the details here).
William Harnisch of Peconic Partners LLC
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 10 best battery stocks to buy to identify the next stock with 10x upside potential. 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 we're going to review the latest hedge fund action encompassing The PNC Financial Services Group Inc. (NYSE:PNC).
Do Hedge Funds Think PNC Is A Good Stock To Buy Now?
At the end of the fourth quarter, a total of 35 of the hedge funds tracked by Insider Monkey were long this stock, a change of -5% from one quarter earlier. On the other hand, there were a total of 42 hedge funds with a bullish position in PNC a year ago. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, GAMCO Investors held the most valuable stake in The PNC Financial Services Group Inc. (NYSE:PNC), which was worth $43.9 million at the end of the fourth quarter. On the second spot was Prospector Partners which amassed $20.4 million worth of shares. Hosking Partners, AQR Capital Management, and Discovery Capital Management 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 Hi-Line Capital Management allocated the biggest weight to The PNC Financial Services Group Inc. (NYSE:PNC), around 2.91% of its 13F portfolio. Prospector Partners is also relatively very bullish on the stock, dishing out 2.53 percent of its 13F equity portfolio to PNC.
Judging by the fact that The PNC Financial Services Group Inc. (NYSE:PNC) has witnessed falling interest from the entirety of the hedge funds we track, we can see that there was a specific group of hedgies that slashed their positions entirely heading into Q1. It's worth mentioning that Daniel Sundheim's D1 Capital Partners cut the largest stake of the 750 funds tracked by Insider Monkey, totaling close to $353 million in stock. Warren Buffett's fund, Berkshire Hathaway, also dropped its stock, about $211 million worth. These moves are important to note, as total hedge fund interest fell by 2 funds heading into Q1.
Let's go over hedge fund activity in other stocks similar to The PNC Financial Services Group Inc. (NYSE:PNC). We will take a look at Brookfield Asset Management Inc. (NYSE:BAM), Ecolab Inc. (NYSE:ECL), Vertex Pharmaceuticals Incorporated (NASDAQ:VRTX), Dominion Energy Inc. (NYSE:D), Air Products & Chemicals, Inc. (NYSE:APD), Norfolk Southern Corp. (NYSE:NSC), and Spotify Technology S.A. (NYSE:SPOT). This group of stocks' market valuations are closest to PNC's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position BAM,38,1330514,3 ECL,45,2449625,-7 VRTX,53,3108859,-2 D,47,1506824,10 APD,50,1282433,1 NSC,44,783686,-3 SPOT,48,2688846,4 Average,46.4,1878684,0.9 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 46.4 hedge funds with bullish positions and the average amount invested in these stocks was $1879 million. That figure was $188 million in PNC's case. Vertex Pharmaceuticals Incorporated (NASDAQ:VRTX) is the most popular stock in this table. On the other hand Brookfield Asset Management Inc. (NYSE:BAM) is the least popular one with only 38 bullish hedge fund positions. Compared to these stocks The PNC Financial Services Group Inc. (NYSE:PNC) is even less popular than BAM. Our overall hedge fund sentiment score for PNC is 23.2. 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 PNC as the stock delivered strong returns, though hedge funds' consensus picks still generated respectable returns. Our calculations showed that top 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks gained 7.9% in 2021 through April 1st and still beat the market by 0.4 percentage points. A small number of hedge funds were also right about betting on PNC as the stock returned 19.9% since Q4 (through April 1st) and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.