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Did Hedge Funds Make The Right Call On Packaging Corporation Of America (PKG) ?

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 821 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 March 31st, a week after the market trough. We are almost done with the second quarter. Investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned almost 20% this quarter. In this article we look at how hedge funds traded Packaging Corporation Of America (NYSE:PKG) and determine whether the smart money was really smart about this stock.

Packaging Corporation Of America (NYSE:PKG) investors should pay attention to an increase in enthusiasm from smart money recently. PKG was in 23 hedge funds’ portfolios at the end of the first quarter of 2020. There were 18 hedge funds in our database with PKG positions at the end of the previous quarter. Our calculations also showed that PKG isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).

Video: Watch our video about the top 5 most popular hedge fund stocks.

In the eyes of most market participants, hedge funds are viewed as worthless, old investment tools of the past. While there are over 8000 funds in operation today, Our researchers hone in on the bigwigs of this club, around 850 funds. These investment experts have their hands on bulk of the hedge fund industry’s total capital, and by keeping an eye on their best stock picks, Insider Monkey has revealed numerous investment strategies that have historically outrun the S&P 500 index. Insider Monkey’s flagship short hedge fund strategy beat the S&P 500 short ETFs by around 20 percentage points annually since its inception in March 2017. Our portfolio of short stocks lost 36% since February 2017 (through May 18th) even though the market was up 30% during the same period. We just shared a list of 8 short targets in our latest quarterly update .

GOTHAM ASSET MANAGEMENT

Joel Greenblatt of Gotham Asset Management

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, on one site we found out that NBA champion Isiah Thomas is now the CEO of this cannabis company. The same site also talks about a snack manufacturer that’s growing at 30% annually. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Hedge fund sentiment towards Tesla reached its all time high at the end of 2019 and Tesla shares more than tripled this year. We are trying to identify other EV revolution winners, so if you have any good ideas send us an email. Keeping this in mind let’s take a look at the new hedge fund action surrounding Packaging Corporation Of America (NYSE:PKG).

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

Heading into the second quarter of 2020, a total of 23 of the hedge funds tracked by Insider Monkey were long this stock, a change of 28% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards PKG over the last 18 quarters. With hedge funds’ sentiment swirling, there exists a few notable hedge fund managers who were adding to their stakes meaningfully (or already accumulated large positions).

Of the funds tracked by Insider Monkey, Cliff Asness’s AQR Capital Management has the most valuable position in Packaging Corporation Of America (NYSE:PKG), worth close to $45.2 million, corresponding to 0.1% of its total 13F portfolio. The second largest stake is held by Marshall Wace LLP, managed by Paul Marshall and Ian Wace, which holds a $18.7 million position; the fund has 0.2% of its 13F portfolio invested in the stock. Other members of the smart money that are bullish include Dmitry Balyasny’s Balyasny Asset Management, Phill Gross and Robert Atchinson’s Adage Capital Management and Joel Greenblatt’s Gotham Asset Management. In terms of the portfolio weights assigned to each position Appian Way Asset Management allocated the biggest weight to Packaging Corporation Of America (NYSE:PKG), around 2.24% of its 13F portfolio. Algert Coldiron Investors is also relatively very bullish on the stock, dishing out 0.37 percent of its 13F equity portfolio to PKG.

With a general bullishness amongst the heavyweights, key money managers were leading the bulls’ herd. Marshall Wace LLP, managed by Paul Marshall and Ian Wace, created the most valuable position in Packaging Corporation Of America (NYSE:PKG). Marshall Wace LLP had $18.7 million invested in the company at the end of the quarter. Dmitry Balyasny’s Balyasny Asset Management also made a $13.6 million investment in the stock during the quarter. The other funds with new positions in the stock are Andrew Byington’s Appian Way Asset Management, Israel Englander’s Millennium Management, and D. E. Shaw’s D E Shaw.

Let’s check out hedge fund activity in other stocks similar to Packaging Corporation Of America (NYSE:PKG). These stocks are Graco Inc. (NYSE:GGG), Carnival Corporation & plc (NYSE:CUK), Banco de Chile (NYSE:BCH), and Catalent Inc (NYSE:CTLT). All of these stocks’ market caps resemble PKG’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
GGG 21 157995 0
CUK 9 41281 -5
BCH 4 34819 -6
CTLT 27 384560 6
Average 15.25 154664 -1.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 15.25 hedge funds with bullish positions and the average amount invested in these stocks was $155 million. That figure was $106 million in PKG’s case. Catalent Inc (NYSE:CTLT) is the most popular stock in this table. On the other hand Banco de Chile (NYSE:BCH) is the least popular one with only 4 bullish hedge fund positions. Packaging Corporation Of America (NYSE:PKG) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 12.3% in 2020 through June 30th but beat the market by 15.5 percentage points. Unfortunately PKG wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on PKG were disappointed as the stock returned 15.9% 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 10 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.

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