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Did Hedge Funds Make The Right Call On People’s United Financial, Inc. (PBCT) ?

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 People’s United Financial, Inc. (NASDAQ:PBCT) and determine whether the smart money was really smart about this stock.

People’s United Financial, Inc. (NASDAQ:PBCT) shares haven’t seen a lot of action during the first quarter. Overall, hedge fund sentiment was unchanged. The stock was in 22 hedge funds’ portfolios at the end of March. At the end of this article we will also compare PBCT to other stocks including Steel Dynamics, Inc. (NASDAQ:STLD), First American Financial Corp (NYSE:FAF), and PG&E Corporation (NYSE:PCG) to get a better sense of its popularity.

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

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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 58 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Dmitry Balyasny of Balyasny Asset Managemnet

Dmitry Balyasny of Balyasny Asset Management

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, legal marijuana is one of the fastest growing industries right now, so we are checking out stock pitches like “the Starbucks of cannabis” to identify the next tenbagger. We go through lists like the 10 most profitable companies in the world 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. 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. Now we’re going to take a peek at the latest hedge fund action regarding People’s United Financial, Inc. (NASDAQ:PBCT).

What have hedge funds been doing with People’s United Financial, Inc. (NASDAQ:PBCT)?

At the end of the first quarter, a total of 22 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the fourth quarter of 2019. On the other hand, there were a total of 20 hedge funds with a bullish position in PBCT a year ago. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, AQR Capital Management held the most valuable stake in People’s United Financial, Inc. (NASDAQ:PBCT), which was worth $14.7 million at the end of the third quarter. On the second spot was Balyasny Asset Management which amassed $10.7 million worth of shares. Hourglass Capital, Citadel Investment Group, and Engineers Gate Manager were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Hourglass Capital allocated the biggest weight to People’s United Financial, Inc. (NASDAQ:PBCT), around 1.6% of its 13F portfolio. TwinBeech Capital is also relatively very bullish on the stock, designating 0.45 percent of its 13F equity portfolio to PBCT.

Seeing as People’s United Financial, Inc. (NASDAQ:PBCT) has witnessed falling interest from the smart money, it’s easy to see that there exists a select few fund managers who sold off their full holdings by the end of the first quarter. At the top of the heap, Daniel Johnson’s Gillson Capital sold off the largest position of all the hedgies monitored by Insider Monkey, totaling close to $18.6 million in stock. Paul Magidson, Jonathan Cohen. And Ostrom Enders’s fund, Castine Capital Management, also sold off its stock, about $11.9 million worth. These transactions are interesting, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s check out hedge fund activity in other stocks similar to People’s United Financial, Inc. (NASDAQ:PBCT). These stocks are Steel Dynamics, Inc. (NASDAQ:STLD), First American Financial Corp (NYSE:FAF), PG&E Corporation (NYSE:PCG), and Nuance Communications Inc. (NASDAQ:NUAN). This group of stocks’ market values match PBCT’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
STLD 27 330665 -8
FAF 40 525520 -2
PCG 48 1984927 -2
NUAN 42 764864 3
Average 39.25 901494 -2.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 39.25 hedge funds with bullish positions and the average amount invested in these stocks was $901 million. That figure was $43 million in PBCT’s case. PG&E Corporation (NYSE:PCG) is the most popular stock in this table. On the other hand Steel Dynamics, Inc. (NASDAQ:STLD) is the least popular one with only 27 bullish hedge fund positions. Compared to these stocks People’s United Financial, Inc. (NASDAQ:PBCT) is even less popular than STLD. Hedge funds dodged a bullet by taking a bearish stance towards PBCT. Our calculations showed that the top 10 most popular hedge fund stocks 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 managed to beat the market by 15.5 percentage points. Unfortunately PBCT wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was very bearish); PBCT investors were disappointed as the stock returned 6.1% during the second 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 so far in 2020.

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