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 PS Business Parks Inc (NYSE:PSB) at the end of the first quarter and determine whether the smart money was really smart about this stock.
PS Business Parks Inc (NYSE:PSB) shareholders have witnessed an increase in hedge fund interest of late. PSB was in 17 hedge funds’ portfolios at the end of the first quarter of 2020. There were 15 hedge funds in our database with PSB positions at the end of the previous quarter. Our calculations also showed that PSB 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In the eyes of most stock holders, hedge funds are assumed to be underperforming, outdated financial tools of the past. While there are more than 8000 funds in operation today, Our researchers hone in on the masters of this group, about 850 funds. These investment experts command bulk of all hedge funds’ total asset base, and by watching their highest performing investments, Insider Monkey has determined a few investment strategies that have historically exceeded the S&P 500 index. Insider Monkey’s flagship short hedge fund strategy outpaced the S&P 500 short ETFs by around 20 percentage points per year 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 .
David Harding of Winton Capital Management
At Insider Monkey we scour multiple sources to uncover the next great investment idea. With Federal Reserve creating trillions of dollars out of thin air, we believe gold prices will keep increasing. So, we are checking out gold stocks like this small gold mining company. 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. Keeping this in mind let’s take a glance at the new hedge fund action surrounding PS Business Parks Inc (NYSE:PSB).
Hedge fund activity in PS Business Parks Inc (NYSE:PSB)
At Q1’s end, a total of 17 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 13% from the previous quarter. On the other hand, there were a total of 12 hedge funds with a bullish position in PSB a year ago. With hedgies’ positions undergoing their usual ebb and flow, there exists an “upper tier” of notable hedge fund managers who were boosting their stakes significantly (or already accumulated large positions).
More specifically, Echo Street Capital Management was the largest shareholder of PS Business Parks Inc (NYSE:PSB), with a stake worth $15.6 million reported as of the end of September. Trailing Echo Street Capital Management was GLG Partners, which amassed a stake valued at $15.3 million. Citadel Investment Group, Millennium Management, and Winton Capital Management 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 Weld Capital Management allocated the biggest weight to PS Business Parks Inc (NYSE:PSB), around 0.48% of its 13F portfolio. Tudor Investment Corp is also relatively very bullish on the stock, designating 0.34 percent of its 13F equity portfolio to PSB.
As industrywide interest jumped, specific money managers have jumped into PS Business Parks Inc (NYSE:PSB) headfirst. Balyasny Asset Management, managed by Dmitry Balyasny, assembled the biggest position in PS Business Parks Inc (NYSE:PSB). Balyasny Asset Management had $6.1 million invested in the company at the end of the quarter. D. E. Shaw’s D E Shaw also made a $2.7 million investment in the stock during the quarter. The following funds were also among the new PSB investors: Paul Marshall and Ian Wace’s Marshall Wace LLP, Minhua Zhang’s Weld Capital Management, and Mika Toikka’s AlphaCrest Capital Management.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as PS Business Parks Inc (NYSE:PSB) but similarly valued. We will take a look at HUYA Inc. (NYSE:HUYA), Woodward Inc (NASDAQ:WWD), OneConnect Financial Technology Co., Ltd. (NYSE:OCFT), and Eaton Vance Corp (NYSE:EV). This group of stocks’ market caps match PSB’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| HUYA | 18 | 265315 | -3 |
| WWD | 24 | 222038 | 2 |
| OCFT | 3 | 1431 | -6 |
| EV | 20 | 37006 | -4 |
| Average | 16.25 | 131448 | -2.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 16.25 hedge funds with bullish positions and the average amount invested in these stocks was $131 million. That figure was $83 million in PSB’s case. Woodward Inc (NASDAQ:WWD) is the most popular stock in this table. On the other hand OneConnect Financial Technology Co., Ltd. (NYSE:OCFT) is the least popular one with only 3 bullish hedge fund positions. PS Business Parks Inc (NYSE:PSB) 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 18.6% in 2020 through July 27th but beat the market by 17.1 percentage points. Unfortunately PSB wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on PSB were disappointed as the stock returned -2.6% 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.
