Investing in small cap stocks has historically been a way to outperform the market, as small cap companies typically grow faster on average than the blue chips. That outperformance comes with a price, however, as there are occasional periods of higher volatility. The last 12 months is one of those periods, as the Russell 2000 ETF (IWM) has underperformed the larger S&P 500 ETF (SPY) by more than 10 percentage points. Given that the funds we track tend to have a disproportionate amount of their portfolios in smaller cap stocks, they have seen some volatility in their portfolios too. Actually their moves are potentially one of the factors that contributed to this volatility. In this article, we use our extensive database of hedge fund holdings to find out what the smart money thinks of Quanta Services Inc (NYSE:PWR).
Quanta Services Inc (NYSE:PWR) investors should pay attention to an increase in activity from the world's largest hedge funds lately. Our calculations also showed that PWR isn't among the 30 most popular stocks among hedge funds.
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 flagship best performing hedge funds strategy returned 25.8% year to date (through May 30th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 40 percentage points since its inception (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Unlike some fund managers who are betting on Dow reaching 40000 in a year, our long-short investment strategy doesn't rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. We're going to go over the key hedge fund action encompassing Quanta Services Inc (NYSE:PWR).
How are hedge funds trading Quanta Services Inc (NYSE:PWR)?
At the end of the second quarter, a total of 29 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 21% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in PWR over the last 16 quarters. With hedgies' sentiment swirling, there exists a few key hedge fund managers who were boosting their stakes significantly (or already accumulated large positions).
According to Insider Monkey's hedge fund database, Peconic Partners LLC, managed by William Harnisch, holds the number one position in Quanta Services Inc (NYSE:PWR). Peconic Partners LLC has a $150 million position in the stock, comprising 29.5% of its 13F portfolio. Sitting at the No. 2 spot is Edgar Wachenheim of Greenhaven Associates, with a $105.9 million position; 1.8% of its 13F portfolio is allocated to the stock. Other peers that hold long positions contain D. E. Shaw's D E Shaw, Cliff Asness's AQR Capital Management and Ken Griffin's Citadel Investment Group.
As aggregate interest increased, key hedge funds have been driving this bullishness. Capital Growth Management, managed by Ken Heebner, created the biggest position in Quanta Services Inc (NYSE:PWR). Capital Growth Management had $5.9 million invested in the company at the end of the quarter. Steve Cohen's Point72 Asset Management also initiated a $5 million position during the quarter. The following funds were also among the new PWR investors: Matthew Tewksbury's Stevens Capital Management, Jeffrey Moskowitz's Harvey Partners, and Paul Marshall and Ian Wace's Marshall Wace LLP.
Let's now review hedge fund activity in other stocks similar to Quanta Services Inc (NYSE:PWR). These stocks are Park Hotels & Resorts Inc. (NYSE:PK), Grupo Financiero Galicia S.A. (NASDAQ:GGAL), Ingredion Incorporated (NYSE:INGR), and Smartsheet Inc. (NYSE:SMAR). This group of stocks' market values match PWR's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position PK,25,374204,11 GGAL,12,109602,-5 INGR,21,255889,3 SMAR,46,1485379,16 Average,26,556269,6.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 26 hedge funds with bullish positions and the average amount invested in these stocks was $556 million. That figure was $540 million in PWR's case. Smartsheet Inc. (NYSE:SMAR) is the most popular stock in this table. On the other hand Grupo Financiero Galicia S.A. (NASDAQ:GGAL) is the least popular one with only 12 bullish hedge fund positions. Quanta Services Inc (NYSE:PWR) 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 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately PWR wasn't nearly as popular as these 20 stocks and hedge funds that were betting on PWR were disappointed as the stock returned -0.9% during the third quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks (view the video below) among hedge funds as many of these stocks already outperformed the market so far this year. Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.