Are Hedge Funds Going To Get Burned By Pinnacle Financial Partners, Inc. (PNFP) ?

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. The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 835 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of December 31st. In this article we look at what those investors think of Pinnacle Financial Partners, Inc. (NASDAQ:PNFP).

Hedge fund interest in Pinnacle Financial Partners, Inc. (NASDAQ:PNFP) shares was flat at the end of last quarter. This is usually a negative indicator. At the end of this article we will also compare PNFP to other stocks including MasTec, Inc. (NYSE:MTZ), MSA Safety Incorporated (NYSE:MSA), and Brunswick Corporation (NYSE:BC) to get a better sense of its popularity.

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 monthly stock picks returned 72.9% since March 2017 and outperformed the S&P 500 ETFs by more than 41 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Paul Marshall Marshall Wace

Paul Marshall of Marshall Wace

We leave no stone unturned when looking for the next great investment idea. For example, we believe electric vehicles and energy storage are set to become giant markets, and we want to take advantage of the declining lithium prices amid the COVID-19 pandemic. 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. 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. With all of this in mind let’s review the new hedge fund action encompassing Pinnacle Financial Partners, Inc. (NASDAQ:PNFP).

What does smart money think about Pinnacle Financial Partners, Inc. (NASDAQ:PNFP)?

Heading into the first quarter of 2020, a total of 16 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from the third quarter of 2019. The graph below displays the number of hedge funds with bullish position in PNFP over the last 18 quarters. With hedge funds’ positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were increasing their holdings considerably (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, Principal Global Investors’s Columbus Circle Investors has the number one position in Pinnacle Financial Partners, Inc. (NASDAQ:PNFP), worth close to $34.3 million, comprising 1.5% of its total 13F portfolio. On Columbus Circle Investors’s heels is 12th Street Asset Management, led by Michael O’Keefe, holding a $22.8 million position; 5.6% of its 13F portfolio is allocated to the stock. Remaining hedge funds and institutional investors that are bullish include Mark Lee’s Forest Hill Capital, Fred Cummings’s Elizabeth Park Capital Management and Emanuel J. Friedman’s EJF Capital. In terms of the portfolio weights assigned to each position 12th Street Asset Management allocated the biggest weight to Pinnacle Financial Partners, Inc. (NASDAQ:PNFP), around 5.62% of its 13F portfolio. Elizabeth Park Capital Management is also relatively very bullish on the stock, earmarking 5.28 percent of its 13F equity portfolio to PNFP.

Judging by the fact that Pinnacle Financial Partners, Inc. (NASDAQ:PNFP) has experienced bearish sentiment from the entirety of the hedge funds we track, we can see that there was a specific group of hedgies that decided to sell off their entire stakes in the third quarter. It’s worth mentioning that Israel Englander’s Millennium Management said goodbye to the biggest position of the “upper crust” of funds monitored by Insider Monkey, totaling about $0.6 million in stock. Mario Gabelli’s fund, GAMCO Investors, also dropped its stock, about $0.4 million worth. These transactions are important to note, as total hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Pinnacle Financial Partners, Inc. (NASDAQ:PNFP) but similarly valued. These stocks are MasTec, Inc. (NYSE:MTZ), MSA Safety Incorporated (NYSE:MSA), Brunswick Corporation (NYSE:BC), and Telecom Argentina S.A. (NYSE:TEO). This group of stocks’ market caps are closest to PNFP’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
MTZ 41 286474 8
MSA 15 44149 5
BC 36 675096 7
TEO 5 37708 1
Average 24.25 260857 5.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 24.25 hedge funds with bullish positions and the average amount invested in these stocks was $261 million. That figure was $106 million in PNFP’s case. MasTec, Inc. (NYSE:MTZ) is the most popular stock in this table. On the other hand Telecom Argentina S.A. (NYSE:TEO) is the least popular one with only 5 bullish hedge fund positions. Pinnacle Financial Partners, Inc. (NASDAQ:PNFP) 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 17.4% in 2020 through March 25th but beat the market by 5.5 percentage points. Unfortunately PNFP wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); PNFP investors were disappointed as the stock returned -45.2% 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 Q1.
5 Most Popular Stocks Among Hedge Funds
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.