Did Hedge Funds Drop The Ball On Powell Industries, Inc. (POWL) ?

Before we spend countless hours researching a company, we like to analyze what insiders, hedge funds and billionaire investors think of the stock first. This is a necessary first step in our investment process because our research has shown that the elite investors’ consensus returns have been exceptional. In the following paragraphs, we find out what the billionaire investors and hedge funds think of Powell Industries, Inc. (NASDAQ:POWL).

Powell Industries, Inc. (NASDAQ:POWL) was in 9 hedge funds’ portfolios at the end of March. POWL investors should pay attention to an increase in hedge fund interest lately. There were 8 hedge funds in our database with POWL positions at the end of the previous quarter. Our calculations also showed that powl isn’t among the 30 most popular stocks among hedge funds.

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 market by 40 percentage points since May 2014 through May 30, 2019 (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.

Chuck Royce

Let’s take a look at the latest hedge fund action regarding Powell Industries, Inc. (NASDAQ:POWL).

Hedge fund activity in Powell Industries, Inc. (NASDAQ:POWL)

At the end of the first quarter, a total of 9 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 13% from the fourth quarter of 2018. Below, you can check out the change in hedge fund sentiment towards POWL over the last 15 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

No of Hedge Funds with POWL Positions

More specifically, Renaissance Technologies was the largest shareholder of Powell Industries, Inc. (NASDAQ:POWL), with a stake worth $10.9 million reported as of the end of March. Trailing Renaissance Technologies was Prospector Partners, which amassed a stake valued at $3.3 million. Royce & Associates, Millennium Management, and Ancora Advisors were also very fond of the stock, giving the stock large weights in their portfolios.

Consequently, key hedge funds were leading the bulls’ herd. Springbok Capital, managed by Gavin Saitowitz and Cisco J. del Valle, established the largest position in Powell Industries, Inc. (NASDAQ:POWL). Springbok Capital had $0.1 million invested in the company at the end of the quarter.

Let’s go over hedge fund activity in other stocks similar to Powell Industries, Inc. (NASDAQ:POWL). We will take a look at Tilly’s Inc (NYSE:TLYS), Citizens, Inc. (NYSE:CIA), Allied Motion Technologies, Inc. (NASDAQ:AMOT), and Business First Bancshares, Inc. (NASDAQ:BFST). All of these stocks’ market caps are closest to POWL’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
TLYS 16 64259 1
CIA 2 1384 0
AMOT 12 32307 0
BFST 1 16956 0
Average 7.75 28727 0.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 7.75 hedge funds with bullish positions and the average amount invested in these stocks was $29 million. That figure was $21 million in POWL’s case. Tilly’s Inc (NYSE:TLYS) is the most popular stock in this table. On the other hand Business First Bancshares, Inc. (NASDAQ:BFST) is the least popular one with only 1 bullish hedge fund positions. Powell Industries, Inc. (NASDAQ:POWL) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 20 most popular stocks among hedge funds returned 6.2% in Q2 through June 19th and outperformed the S&P 500 ETF (SPY) by nearly 3 percentage points. Hedge funds were also right about betting on POWL as the stock returned 38.5% during the same period and outperformed the market by an even larger margin. Hedge funds were rewarded for their relative bullishness.

Disclosure: None. This article was originally published at Insider Monkey.