At Insider Monkey, we pore over the filings of nearly 750 top investment firms every quarter, a process we have now completed for the latest reporting period. The data we've gathered as a result gives us access to a wealth of collective knowledge based on these firms' portfolio holdings as of December 31. In this article, we will use that wealth of knowledge to determine whether or not Provident Financial Services, Inc. (NYSE:PFS) makes for a good investment right now.
Hedge fund interest in Provident Financial Services, Inc. (NYSE:PFS) shares was flat at the end of last quarter. This is usually a negative indicator. At the end of this article we will also compare PFS to other stocks including Solaredge Technologies Inc (NASDAQ:SEDG), Cohen & Steers, Inc. (NYSE:CNS), and Avaya Holdings Corp. (NYSE:AVYA) to get a better sense of its popularity.
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 32 percentage points since May 2014 through March 12, 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 27.5% through March 12, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Let's take a peek at the latest hedge fund action regarding Provident Financial Services, Inc. (NYSE:PFS).
How are hedge funds trading Provident Financial Services, Inc. (NYSE:PFS)?
At the end of the fourth quarter, a total of 8 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from the second quarter of 2018. On the other hand, there were a total of 10 hedge funds with a bullish position in PFS a year ago. With hedge funds' capital changing hands, there exists a few key hedge fund managers who were boosting their holdings considerably (or already accumulated large positions).
More specifically, Renaissance Technologies was the largest shareholder of Provident Financial Services, Inc. (NYSE:PFS), with a stake worth $33.3 million reported as of the end of December. Trailing Renaissance Technologies was Millennium Management, which amassed a stake valued at $8.5 million. Moore Global Investments, Citadel Investment Group, and Holocene Advisors were also very fond of the stock, giving the stock large weights in their portfolios.
Earlier we told you that the aggregate hedge fund interest in the stock was unchanged and we view this as a negative development. Even though there weren't any hedge funds dumping their holdings during the third quarter, there weren't any hedge funds initiating brand new positions. This indicates that hedge funds, at the very best, perceive this stock as dead money and they haven't identified any viable catalysts that can attract investor attention.
Let's go over hedge fund activity in other stocks similar to Provident Financial Services, Inc. (NYSE:PFS). These stocks are Solaredge Technologies Inc (NASDAQ:SEDG), Cohen & Steers, Inc. (NYSE:CNS), Avaya Holdings Corp. (NYSE:AVYA), and Sibanye Gold Ltd (NYSE:SBGL). This group of stocks' market valuations match PFS's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position SEDG,14,50613,0 CNS,8,47029,-1 AVYA,36,353504,2 SBGL,12,37299,0 Average,17.5,122111,0.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 17.5 hedge funds with bullish positions and the average amount invested in these stocks was $122 million. That figure was $52 million in PFS's case. Avaya Holdings Corp. (NYSE:AVYA) is the most popular stock in this table. On the other hand Cohen & Steers, Inc. (NYSE:CNS) is the least popular one with only 8 bullish hedge fund positions. Compared to these stocks Provident Financial Services, Inc. (NYSE:PFS) is even less popular than CNS. Hedge funds dodged a bullet by taking a bearish stance towards PFS. Our calculations showed that the top 15 most popular hedge fund stocks returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. Unfortunately PFS wasn't nearly as popular as these 15 stock (hedge fund sentiment was very bearish); PFS investors were disappointed as the stock returned 11.4% and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 15 most popular stocks) among hedge funds as 13 of these stocks already outperformed the market this year.
Disclosure: None. This article was originally published at Insider Monkey.