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 Peoples Bancorp Inc. (NASDAQ:PEBO) at the end of the first quarter and determine whether the smart money was really smart about this stock.
Peoples Bancorp Inc. (NASDAQ:PEBO) shares haven’t seen a lot of action during the first quarter. Overall, hedge fund sentiment was unchanged. The stock was in 11 hedge funds’ portfolios at the end of the first quarter of 2020. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Evolent Health Inc (NYSE:EVH), Core Laboratories N.V. (NYSE:CLB), and Oaktree Specialty Lending Corporation (NASDAQ:OCSL) to gather more data points. Our calculations also showed that PEBO 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 financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 101% since March 2017 and outperformed the S&P 500 ETFs by more than 58 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
At Insider Monkey we scour multiple sources to uncover the next great investment idea. There is a lot of volatility in the markets and this presents amazing investment opportunities from time to time. For example, this trader claims to deliver juiced up returns with one trade a week, so we are checking out his highest conviction idea. A second trader claims to score lucrative profits by utilizing a “weekend trading strategy”, so we look into his strategy’s picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We recently recommended several stocks partly inspired by legendary Bill Miller’s investor letter. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind let’s go over the fresh hedge fund action surrounding Peoples Bancorp Inc. (NASDAQ:PEBO).
Hedge fund activity in Peoples Bancorp Inc. (NASDAQ:PEBO)
Heading into the second quarter of 2020, a total of 11 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the fourth quarter of 2019. By comparison, 9 hedge funds held shares or bullish call options in PEBO a year ago. With hedge funds’ positions undergoing their usual ebb and flow, there exists an “upper tier” of key hedge fund managers who were increasing their stakes considerably (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, Renaissance Technologies has the most valuable position in Peoples Bancorp Inc. (NASDAQ:PEBO), worth close to $11.3 million, corresponding to less than 0.1%% of its total 13F portfolio. The second most bullish fund manager is Fred Cummings of Elizabeth Park Capital Management, with a $3.5 million position; 2.7% of its 13F portfolio is allocated to the company. Other professional money managers with similar optimism include John Overdeck and David Siegel’s Two Sigma Advisors, David Harding’s Winton Capital Management and Ken Griffin’s Citadel Investment Group. In terms of the portfolio weights assigned to each position Elizabeth Park Capital Management allocated the biggest weight to Peoples Bancorp Inc. (NASDAQ:PEBO), around 2.66% of its 13F portfolio. Zebra Capital Management is also relatively very bullish on the stock, dishing out 0.89 percent of its 13F equity portfolio to PEBO.
We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Millennium Management. One hedge fund selling its entire position doesn’t always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don’t think this is the case in this case because only one of the 800+ hedge funds tracked by Insider Monkey identified as a viable investment and initiated a position in the stock (that fund was Engineers Gate Manager).
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Peoples Bancorp Inc. (NASDAQ:PEBO) but similarly valued. These stocks are Evolent Health Inc (NYSE:EVH), Core Laboratories N.V. (NYSE:CLB), Oaktree Specialty Lending Corporation (NASDAQ:OCSL), and Grid Dynamics Holdings, Inc. (NASDAQ:GDYN). This group of stocks’ market caps resemble PEBO’s market cap.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 13.5 hedge funds with bullish positions and the average amount invested in these stocks was $43 million. That figure was $19 million in PEBO’s case. Core Laboratories N.V. (NYSE:CLB) is the most popular stock in this table. On the other hand Grid Dynamics Holdings, Inc. (NASDAQ:GDYN) is the least popular one with only 12 bullish hedge fund positions. Compared to these stocks Peoples Bancorp Inc. (NASDAQ:PEBO) is even less popular than GDYN. Hedge funds dodged a bullet by taking a bearish stance towards PEBO. 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 PEBO wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was very bearish); PEBO investors were disappointed as the stock returned -2.6% 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.