Did Hedge Funds Make The Right Call On Peapack-Gladstone Financial Corp (PGC)?

At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (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. In this article, we will take a closer look at hedge fund sentiment towards Peapack-Gladstone Financial Corp (NASDAQ:PGC) at the end of the first quarter and determine whether the smart money was really smart about this stock.

Peapack-Gladstone Financial Corp (NASDAQ:PGC) was in 18 hedge funds’ portfolios at the end of the first quarter of 2020. PGC has experienced an increase in support from the world’s most elite money managers in recent months. There were 17 hedge funds in our database with PGC holdings at the end of the previous quarter. Our calculations also showed that PGC 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.

According to most traders, hedge funds are perceived as unimportant, outdated investment vehicles of yesteryear. While there are over 8000 funds in operation at present, Our experts choose to focus on the masters of this group, about 850 funds. These money managers command the majority of all hedge funds’ total capital, and by observing their finest stock picks, Insider Monkey has revealed a few investment strategies that have historically surpassed Mr. Market. Insider Monkey’s flagship short hedge fund strategy defeated 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 .

Michael Price MFP Investors

Michael Price of MFP Investors

At Insider Monkey we scour multiple sources to uncover the next great investment idea. Cannabis stocks are roaring back in 2020, so we are checking out this under-the-radar stock. We go through lists like the 10 most profitable companies in America to pick the best large-cap stocks to buy. 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. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. Now we’re going to review the latest hedge fund action regarding Peapack-Gladstone Financial Corp (NASDAQ:PGC).

What have hedge funds been doing with Peapack-Gladstone Financial Corp (NASDAQ:PGC)?

Heading into the second quarter of 2020, a total of 18 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 6% from the fourth quarter of 2019. The graph below displays the number of hedge funds with bullish position in PGC over the last 18 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Of the funds tracked by Insider Monkey, Renaissance Technologies has the number one position in Peapack-Gladstone Financial Corp (NASDAQ:PGC), worth close to $9.3 million, comprising less than 0.1%% of its total 13F portfolio. The second largest stake is held by Chuck Royce of Royce & Associates, with a $7.1 million position; 0.1% of its 13F portfolio is allocated to the stock. Remaining members of the smart money with similar optimism encompass Michael Price’s MFP Investors, Emanuel J. Friedman’s EJF Capital and Matthew Lindenbaum’s Basswood Capital. In terms of the portfolio weights assigned to each position Seidman Investment Partnership allocated the biggest weight to Peapack-Gladstone Financial Corp (NASDAQ:PGC), around 2.76% of its 13F portfolio. Elizabeth Park Capital Management is also relatively very bullish on the stock, earmarking 1.39 percent of its 13F equity portfolio to PGC.

Consequently, key money managers have been driving this bullishness. Engineers Gate Manager, managed by Greg Eisner, initiated the most outsized position in Peapack-Gladstone Financial Corp (NASDAQ:PGC). Engineers Gate Manager had $0.4 million invested in the company at the end of the quarter. Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital also made a $0.3 million investment in the stock during the quarter.

Let’s now take a look at hedge fund activity in other stocks similar to Peapack-Gladstone Financial Corp (NASDAQ:PGC). These stocks are Organogenesis Holdings Inc. (NASDAQ:ORGO), NGL Energy Partners LP (NYSE:NGL), Select Energy Services, Inc. (NYSE:WTTR), and KNOT Offshore Partners LP (NYSE:KNOP). This group of stocks’ market caps are closest to PGC’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
ORGO 5 2903 -3
NGL 4 3343 0
WTTR 16 18497 0
KNOP 6 20344 1
Average 7.75 11272 -0.5

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 $11 million. That figure was $36 million in PGC’s case. Select Energy Services, Inc. (NYSE:WTTR) is the most popular stock in this table. On the other hand NGL Energy Partners LP (NYSE:NGL) is the least popular one with only 4 bullish hedge fund positions. Compared to these stocks Peapack-Gladstone Financial Corp (NASDAQ:PGC) is more popular among hedge funds. 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 18.6% in 2020 through July 27th and still beat the market by 17.1 percentage points. Unfortunately PGC wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on PGC were disappointed as the stock returned -8.1% since the end of the first quarter 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 most of these stocks already outperformed the market in 2020.

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