In this article we will check out the progression of hedge fund sentiment towards PS Business Parks Inc (NYSE:PSB) and determine whether it is a good investment right now. We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also employ numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.
Is PS Business Parks Inc (NYSE:PSB) the right pick for your portfolio? The smart money is taking a bullish view. The number of bullish hedge fund bets improved by 2 in recent months. Our calculations also showed that PSB isn't among the 30 most popular stocks among hedge funds (click for Q1 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.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds' small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 58 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren't comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
[caption id="attachment_258236" align="aligncenter" width="400"] Ken Griffin of Citadel Investment Group[/caption]
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now we're going to take a gander at the key hedge fund action encompassing PS Business Parks Inc (NYSE:PSB).
How are hedge funds trading PS Business Parks Inc (NYSE:PSB)?
At the end of the first quarter, a total of 17 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 13% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards PSB over the last 18 quarters. With hedge funds' capital changing hands, there exists an "upper tier" of key hedge fund managers who were boosting their holdings considerably (or already accumulated large positions).
Of the funds tracked by Insider Monkey, Greg Poole's Echo Street Capital Management has the number one position in PS Business Parks Inc (NYSE:PSB), worth close to $15.6 million, comprising 0.3% of its total 13F portfolio. The second most bullish fund manager is Noam Gottesman of GLG Partners, with a $15.3 million position; 0.1% of its 13F portfolio is allocated to the stock. Some other professional money managers that hold long positions consist of Ken Griffin's Citadel Investment Group, Israel Englander's Millennium Management and David Harding's Winton Capital Management. In terms of the portfolio weights assigned to each position Weld Capital Management allocated the biggest weight to PS Business Parks Inc (NYSE:PSB), around 0.48% of its 13F portfolio. Tudor Investment Corp is also relatively very bullish on the stock, earmarking 0.34 percent of its 13F equity portfolio to PSB.
As one would reasonably expect, specific money managers have been driving this bullishness. Balyasny Asset Management, managed by Dmitry Balyasny, created the most outsized position in PS Business Parks Inc (NYSE:PSB). Balyasny Asset Management had $6.1 million invested in the company at the end of the quarter. D. E. Shaw's D E Shaw also initiated a $2.7 million position during the quarter. The other funds with new positions in the stock are Paul Marshall and Ian Wace's Marshall Wace LLP, Minhua Zhang's Weld Capital Management, and Mika Toikka's AlphaCrest Capital Management.
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as PS Business Parks Inc (NYSE:PSB) but similarly valued. These stocks are HUYA Inc. (NYSE:HUYA), Woodward Inc (NASDAQ:WWD), OneConnect Financial Technology Co., Ltd. (NYSE:OCFT), and Eaton Vance Corp (NYSE:EV). All of these stocks' market caps are closest to PSB's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position HUYA,18,265315,-3 WWD,24,222038,2 OCFT,3,1431,-6 EV,20,37006,-4 Average,16.25,131448,-2.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 16.25 hedge funds with bullish positions and the average amount invested in these stocks was $131 million. That figure was $83 million in PSB's case. Woodward Inc (NASDAQ:WWD) is the most popular stock in this table. On the other hand OneConnect Financial Technology Co., Ltd. (NYSE:OCFT) is the least popular one with only 3 bullish hedge fund positions. PS Business Parks Inc (NYSE:PSB) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we'd rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 13.4% in 2020 through June 22nd but beat the market by 15.9 percentage points. Unfortunately PSB wasn't nearly as popular as these 10 stocks and hedge funds that were betting on PSB were disappointed as the stock returned -1.5% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
Disclosure: None. This article was originally published at Insider Monkey.