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In this article we will analyze whether Prudential Financial Inc (NYSE:PRU) is a good investment right now by following the lead of some of the best investors in the world and piggybacking their ideas. There's no better way to get these firms' immense resources and analytical capabilities working for us than to follow their lead into their best ideas. While not all of these picks will be winners, our research shows that these picks historically outperformed the market by double digits annually.
Is PRU a good stock to buy? Prudential Financial Inc (NYSE:PRU) was in 28 hedge funds' portfolios at the end of June. The all time high for this statistic is 39. PRU investors should be aware of a decrease in activity from the world's largest hedge funds lately. There were 37 hedge funds in our database with PRU holdings at the end of March. Our calculations also showed that PRU isn't among the 30 most popular stocks among hedge funds (click for Q2 rankings).
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey's monthly stock picks returned 185.4% since March 2017 and outperformed the S&P 500 ETFs by more than 79 percentage points (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Ken Heebner of Capital Growth Management
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. 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 homepage. With all of this in mind let's check out the key hedge fund action surrounding Prudential Financial Inc (NYSE:PRU).
Do Hedge Funds Think PRU Is A Good Stock To Buy Now?
At the end of the second quarter, a total of 28 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -24% from the first quarter of 2020. Below, you can check out the change in hedge fund sentiment towards PRU over the last 24 quarters. With hedge funds' sentiment swirling, there exists a few notable hedge fund managers who were boosting their holdings considerably (or already accumulated large positions).
The largest stake in Prudential Financial Inc (NYSE:PRU) was held by Arrowstreet Capital, which reported holding $231.1 million worth of stock at the end of June. It was followed by Adage Capital Management with a $44.3 million position. Other investors bullish on the company included Mountain Road Advisors, Capital Growth Management, and Millennium Management. In terms of the portfolio weights assigned to each position Mountain Road Advisors allocated the biggest weight to Prudential Financial Inc (NYSE:PRU), around 7.52% of its 13F portfolio. Capital Growth Management is also relatively very bullish on the stock, dishing out 3.19 percent of its 13F equity portfolio to PRU.
Seeing as Prudential Financial Inc (NYSE:PRU) has faced a decline in interest from the smart money, logic holds that there lies a certain "tier" of hedgies that decided to sell off their full holdings in the second quarter. Intriguingly, Peter Seuss's Prana Capital Management said goodbye to the largest position of all the hedgies tracked by Insider Monkey, worth close to $38.5 million in stock. Benjamin A. Smith's fund, Laurion Capital Management, also said goodbye to its stock, about $13.6 million worth. These transactions are important to note, as total hedge fund interest fell by 9 funds in the second quarter.
Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as Prudential Financial Inc (NYSE:PRU) but similarly valued. We will take a look at Las Vegas Sands Corp. (NYSE:LVS), PPG Industries, Inc. (NYSE:PPG), Cintas Corporation (NASDAQ:CTAS), Sempra Energy (NYSE:SRE), CRH PLC (NYSE:CRH), SYSCO Corporation (NYSE:SYY), and Pioneer Natural Resources Company (NYSE:PXD). All of these stocks' market caps are closest to PRU's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position LVS,48,1758510,-14 PPG,26,233709,1 CTAS,21,539216,-11 SRE,28,343994,1 CRH,9,90599,0 SYY,40,2600524,-2 PXD,45,876323,8 Average,31,920411,-2.4 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 31 hedge funds with bullish positions and the average amount invested in these stocks was $920 million. That figure was $494 million in PRU's case. Las Vegas Sands Corp. (NYSE:LVS) is the most popular stock in this table. On the other hand CRH PLC (NYSE:CRH) is the least popular one with only 9 bullish hedge fund positions. Prudential Financial Inc (NYSE:PRU) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for PRU is 41.9. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 24.9% in 2021 through October 15th and still beat the market by 4.5 percentage points. A small number of hedge funds were also right about betting on PRU as the stock returned 9.1% since the end of the second quarter (through 10/15) and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.