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Is Packaging Corp Of America (PKG) A Good Stock To Buy?

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The equity market returns were very disappointing in the third quarter, “thanks” to the slowdown of China’s economy and the weaker-than-expected U.S. economic data. It was not entirely clear whether the broader market sell-off made U.S. equity valuations undervalued, but it definitely made them more attractive. It is worth mentioning that Russell 2000 ETF (IWM) underperformed the broad-market S&P 500 ETF by more than 14 percentage points during the period of June 25, 2015 through October 30, 2015. This clearly points to the fact that most investors, including hedge fund firms and institutional investors, heavily cut their exposure to high-potential (but seemingly riskier) small-cap stocks during the bloody third quarter. So let’s take a glance at the smart money sentiment towards Packaging Corp Of America (NYSE:PKG) and see how it was affected.

Packaging Corp Of America (NYSE:PKG) investors should be aware of a decrease in enthusiasm from smart money of late. PKG was in 19 hedge funds’ portfolios at the end of September. There were 31 hedge funds in our database with PKG holdings at the end of the previous quarter. At the end of this article we will also compare PKG to other stocks including Rollins, Inc. (NYSE:ROL), Antero Resources Corp (NYSE:AR), and Markit Ltd (NASDAQ:MRKT) to get a better sense of its popularity.

Follow Packaging Corp Of America (NYSE:PKG)
Trade (NYSE:PKG) Now!

Today there are plenty of indicators investors can use to grade publicly traded companies. A duo of the most under-the-radar indicators are hedge fund and insider trading signals. We have shown that, historically, those who follow the top picks of the best investment managers can beat the market by a very impressive amount (see the details here).

With all of this in mind, let’s take a look at the new action encompassing Packaging Corp Of America (NYSE:PKG).

How are hedge funds trading Packaging Corp Of America (NYSE:PKG)?

Heading into Q4, a total of 19 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -39% from the second quarter. With the smart money’s capital changing hands, there exists an “upper tier” of notable hedge fund managers who were increasing their stakes significantly (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, D E Shaw, managed by D. E. Shaw, holds the largest position in Packaging Corp Of America (NYSE:PKG). D E Shaw has an $68.7 million position in the stock, comprising 0.1% of its 13F portfolio. Coming in second is AQR Capital Management, led by Cliff Asness, holding an $33 million position; 0.1% of its 13F portfolio is allocated to the stock. Remaining peers that are bullish include Michael O’Keefe’s 12th Street Asset Management, Kenney Y. Oh’s SeaStone Capital Management and Matthew Hulsizer’s PEAK6 Capital Management.

Due to the fact that Packaging Corp Of America (NYSE:PKG) has faced falling interest from the smart money, we can see that there is a sect of hedge funds who sold off their entire stakes heading into Q4. It’s worth mentioning that Richard McGuire’s Marcato Capital Management dumped the largest investment of the “upper crust” of funds watched by Insider Monkey, valued at about $204.2 million in stock. Craig C. Albert’s fund, Sheffield Asset Management, also dropped its stock, about $30.2 million worth. These bearish behaviors are important to note, as total hedge fund interest was cut by 12 funds heading into Q4.

On the next page, we analyze hedge fund activity of similarly priced stocks to get a better feel on what the elite funds think of PKG.

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