Reputable billionaire investors such as Jim Simons, Cliff Asness and David Tepper generate exorbitant profits for their wealthy accredited investors (a minimum of $1 million in investable assets would be required to invest in a hedge fund and most successful hedge funds won't accept your savings unless you commit at least $5 million) by pinpointing winning small-cap stocks. There is little or no publicly-available information at all on some of these small companies, which makes it hard for an individual investor to pin down a winner within the small-cap space. However, hedge funds and other big asset managers can do the due diligence and analysis for you instead, thanks to their highly-skilled research teams and vast resources to conduct an appropriate evaluation process. Looking for potential winners within the small-cap galaxy of stocks? We believe following the smart money is a good starting point.
PNM Resources, Inc. (NYSE:PNM) has experienced a decrease in support from the world's most elite money managers lately. Our calculations also showed that PNM isn't among the 30 most popular stocks among hedge funds.
Hedge funds' reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn't keep up with the unhedged returns of the market indices. Our research has shown that hedge funds' large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 30.9% through May 30, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
We're going to view the key hedge fund action regarding PNM Resources, Inc. (NYSE:PNM).
How are hedge funds trading PNM Resources, Inc. (NYSE:PNM)?
Heading into the second quarter of 2019, a total of 14 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -22% from the fourth quarter of 2018. The graph below displays the number of hedge funds with bullish position in PNM over the last 15 quarters. 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 PNM Resources, Inc. (NYSE:PNM), which was worth $119.6 million at the end of the first quarter. On the second spot was GAMCO Investors which amassed $98.8 million worth of shares. Moreover, AQR Capital Management, Citadel Investment Group, and Shelter Harbor Advisors were also bullish on PNM Resources, Inc. (NYSE:PNM), allocating a large percentage of their portfolios to this stock.
Seeing as PNM Resources, Inc. (NYSE:PNM) has faced declining sentiment from the entirety of the hedge funds we track, it's safe to say that there is a sect of funds that elected to cut their full holdings by the end of the third quarter. Intriguingly, Paul Tudor Jones's Tudor Investment Corp cut the biggest stake of all the hedgies followed by Insider Monkey, comprising about $1.4 million in stock, and Ian Cumming and Joseph Steinberg's Leucadia National was right behind this move, as the fund dumped about $1.3 million worth. These transactions are intriguing to say the least, as total hedge fund interest dropped by 4 funds by the end of the third quarter.
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as PNM Resources, Inc. (NYSE:PNM) but similarly valued. We will take a look at FirstCash, Inc. (NASDAQ:FCFS), Univar Inc (NYSE:UNVR), Penske Automotive Group, Inc. (NYSE:PAG), and Graphic Packaging Holding Company (NYSE:GPK). This group of stocks' market caps are similar to PNM's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position FCFS,12,164726,0 UNVR,42,1098378,19 PAG,18,70927,-5 GPK,24,639511,4 Average,24,493386,4.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 24 hedge funds with bullish positions and the average amount invested in these stocks was $493 million. That figure was $323 million in PNM's case. Univar Inc (NYSE:UNVR) is the most popular stock in this table. On the other hand FirstCash, Inc. (NASDAQ:FCFS) is the least popular one with only 12 bullish hedge fund positions. PNM Resources, Inc. (NYSE:PNM) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 20 most popular stocks among hedge funds returned 6.2% in Q2 through June 19th and outperformed the S&P 500 ETF (SPY) by nearly 3 percentage points. A small number of hedge funds were also right about betting on PNM as the stock returned 9.3% during the same time frame and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.