We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (see why hell is coming).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds' and successful investors' positions as of the end of the fourth quarter. You can find articles about an individual hedge fund's trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 4 years and analyze what the smart money thinks of Park National Corporation (NYSE:PRK) based on that data.
Park National Corporation (NYSE:PRK) has seen an increase in hedge fund sentiment in recent months. Our calculations also showed that PRK isn't among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).
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' 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 41 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.
[caption id="attachment_26029" align="aligncenter" width="399"] Steven Cohen of Point72 Asset Management[/caption]
We leave no stone unturned when looking for the next great investment idea. For example, Federal Reserve and other Central Banks are tripping over each other to print more money. As a result, we believe gold stocks will outperform fixed income ETFs in the long-term. So we are checking out investment opportunities like this one. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences (by the way watch this video if you want to hear one of the best healthcare hedge fund manager's coronavirus analysis). Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic's significance before most investors. Keeping this in mind let's take a glance at the fresh hedge fund action regarding Park National Corporation (NYSE:PRK).
What does smart money think about Park National Corporation (NYSE:PRK)?
Heading into the first quarter of 2020, a total of 10 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 11% from the previous quarter. By comparison, 7 hedge funds held shares or bullish call options in PRK a year ago. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Renaissance Technologies was the largest shareholder of Park National Corporation (NYSE:PRK), with a stake worth $7.1 million reported as of the end of September. Trailing Renaissance Technologies was Winton Capital Management, which amassed a stake valued at $3.2 million. Citadel Investment Group, Point72 Asset Management, and Millennium Management were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Winton Capital Management allocated the biggest weight to Park National Corporation (NYSE:PRK), around 0.04% of its 13F portfolio. Schonfeld Strategic Advisors is also relatively very bullish on the stock, designating 0.01 percent of its 13F equity portfolio to PRK.
As one would reasonably expect, some big names were leading the bulls' herd. Point72 Asset Management, managed by Steve Cohen, established the most valuable position in Park National Corporation (NYSE:PRK). Point72 Asset Management had $0.8 million invested in the company at the end of the quarter. Ryan Tolkin (CIO)'s Schonfeld Strategic Advisors also initiated a $0.3 million position during the quarter. The only other fund with a new position in the stock is Frederick DiSanto's Ancora Advisors.
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Park National Corporation (NYSE:PRK) but similarly valued. These stocks are Core Laboratories N.V. (NYSE:CLB), Mobile Mini Inc (NASDAQ:MINI), Denali Therapeutics Inc. (NASDAQ:DNLI), and SpringWorks Therapeutics, Inc. (NASDAQ:SWTX). All of these stocks' market caps are closest to PRK's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CLB,25,118775,9 MINI,24,193790,2 DNLI,9,28103,1 SWTX,11,658924,0 Average,17.25,249898,3 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 17.25 hedge funds with bullish positions and the average amount invested in these stocks was $250 million. That figure was $15 million in PRK's case. Core Laboratories N.V. (NYSE:CLB) is the most popular stock in this table. On the other hand Denali Therapeutics Inc. (NASDAQ:DNLI) is the least popular one with only 9 bullish hedge fund positions. Park National Corporation (NYSE:PRK) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and 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 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 13.0% in 2020 through April 6th but beat the market by 4.2 percentage points. Unfortunately PRK wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); PRK investors were disappointed as the stock returned -25.8% 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 20 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020. 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.