Is Packaging Corp Of America (NYSE:PKG) a buy here? Hedge funds are getting less bullish. The number of long hedge fund positions stayed the same which is a slightly negative development in our experience
If you'd ask most shareholders, hedge funds are assumed to be slow, old investment tools of yesteryear. While there are over 8000 funds in operation at the moment, we at Insider Monkey look at the elite of this club, around 450 funds. It is widely believed that this group has its hands on the majority of the smart money's total asset base, and by keeping an eye on their highest performing stock picks, we have unearthed a number of investment strategies that have historically beaten the S&P 500 index. Our small-cap hedge fund strategy outstripped the S&P 500 index by 18 percentage points annually for a decade in our back tests, and since we've started sharing our picks with our subscribers at the end of August 2012, we have outpaced the S&P 500 index by 23.3 percentage points in 8 months (see all of our picks from August).
Just as important, optimistic insider trading sentiment is a second way to parse down the financial markets. There are many stimuli for an executive to drop shares of his or her company, but just one, very obvious reason why they would initiate a purchase. Various academic studies have demonstrated the valuable potential of this tactic if you know where to look (learn more here).
With all of this in mind, we're going to take a look at the key action regarding Packaging Corp Of America (NYSE:PKG).
In preparation for this quarter, a total of 22 of the hedge funds we track were long in this stock, a change of 0% from the previous quarter. With hedgies' capital changing hands, there exists a select group of key hedge fund managers who were upping their stakes substantially.
Of the funds we track, Jean-Marie Eveillard's First Eagle Investment Management had the largest position in Packaging Corp Of America (NYSE:PKG), worth close to $70.8 million, comprising 0.2% of its total 13F portfolio. Coming in second is Iridian Asset Management, managed by David Cohen and Harold Levy, which held a $66.3 million position; 1% of its 13F portfolio is allocated to the company. Other hedge funds with similar optimism include Jeffrey Vinik's Vinik Asset Management, SAC Subsidiary's CR Intrinsic Investors and Steven Cohen's SAC Capital Advisors.
Because Packaging Corp Of America (NYSE:PKG) has experienced bearish sentiment from the entirety of the hedge funds we track, logic holds that there exists a select few funds who sold off their full holdings heading into Q2. At the top of the heap, Dmitry Balyasny's Balyasny Asset Management dropped the biggest investment of the "upper crust" of funds we track, totaling an estimated $6 million in stock.. Anthony Bozza's fund, Lakewood Capital Management, also sold off its stock, about $2.2 million worth. These moves are intriguing to say the least, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Insider purchases made by high-level executives is most useful when the company in question has seen transactions within the past six months. Over the latest 180-day time frame, Packaging Corp Of America (NYSE:PKG) has seen zero unique insiders purchasing, and 3 insider sales (see the details of insider trades here).
Let's also examine hedge fund and insider activity in other stocks similar to Packaging Corp Of America (NYSE:PKG). These stocks are AptarGroup, Inc. (NYSE:ATR), Sealed Air Corp (NYSE:SEE), Bemis Company, Inc. (NYSE:BMS), Owens-Illinois Inc (NYSE:OI), and Tupperware Brands Corporation (NYSE:TUP). This group of stocks belong to the packaging & containers industry and their market caps match PKG's market cap.