While the market driven by short-term sentiment influenced by the accomodative interest rate environment in the US, increasing oil prices and deteriorating expectations towards the resolution of the trade war with China, many smart money investors kept their cautious approach regarding the current bull run in the third quarter and hedging or reducing many of their long positions. Some fund managers are betting on Dow hitting 40,000 to generate strong returns. However, as we know, big investors usually buy stocks with strong fundamentals that can deliver gains both in bull and bear markets, which is why we believe we can profit from imitating them. In this article, we are going to take a look at the smart money sentiment surrounding PNC Financial Services Group Inc. (NYSE:PNC) and see how the stock performed in comparison to hedge funds’ consensus picks.
Is PNC Financial Services Group Inc. (NYSE:PNC) the right pick for your portfolio? Money managers are getting more optimistic. The number of bullish hedge fund positions increased by 1 lately. Our calculations also showed that PNC isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video at the end of this article for Q2 rankings).
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 flagship best performing hedge funds strategy returned 91% since May 2014 and outperformed the Russell 2000 ETFs by nearly 40 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.
Warren Buffett of Berkshire Hathaway
We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We even check out this option genius’ weekly trade ideas. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager’s investor letter and the stock already gained 20 percent. With all of this in mind we’re going to take a peek at the fresh hedge fund action surrounding PNC Financial Services Group Inc. (NYSE:PNC).
What does smart money think about PNC Financial Services Group Inc. (NYSE:PNC)?
At Q3’s end, a total of 39 of the hedge funds tracked by Insider Monkey were long this stock, a change of 3% from the second quarter of 2019. The graph below displays the number of hedge funds with bullish position in PNC over the last 17 quarters. With the smart money’s sentiment swirling, there exists an “upper tier” of notable hedge fund managers who were increasing their holdings meaningfully (or already accumulated large positions).
Of the funds tracked by Insider Monkey, Berkshire Hathaway, managed by Warren Buffett, holds the most valuable position in PNC Financial Services Group Inc. (NYSE:PNC). Berkshire Hathaway has a $1.2153 billion position in the stock, comprising 0.6% of its 13F portfolio. On Berkshire Hathaway’s heels is Peter Rathjens, Bruce Clarke and John Campbell of Arrowstreet Capital, with a $169.2 million position; the fund has 0.4% of its 13F portfolio invested in the stock. Remaining members of the smart money with similar optimism contain Ken Griffin’s Citadel Investment Group, Phill Gross and Robert Atchinson’s Adage Capital Management and Clint Carlson’s Carlson Capital. In terms of the portfolio weights assigned to each position Gillson Capital allocated the biggest weight to PNC Financial Services Group Inc. (NYSE:PNC), around 6.14% of its 13F portfolio. Third Avenue Management is also relatively very bullish on the stock, dishing out 3.43 percent of its 13F equity portfolio to PNC.
As aggregate interest increased, some big names were breaking ground themselves. Centiva Capital, managed by Karim Abbadi and Edward McBride, assembled the biggest call position in PNC Financial Services Group Inc. (NYSE:PNC). Centiva Capital had $9.5 million invested in the company at the end of the quarter. Paul Tudor Jones’s Tudor Investment Corp also made a $0.6 million investment in the stock during the quarter. The following funds were also among the new PNC investors: Michael Gelband’s ExodusPoint Capital, Israel Englander’s Millennium Management, and Michael Platt and William Reeves’s BlueCrest Capital Mgmt..
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as PNC Financial Services Group Inc. (NYSE:PNC) but similarly valued. These stocks are Intuitive Surgical, Inc. (NASDAQ:ISRG), Anthem Inc (NYSE:ANTM), VMware, Inc. (NYSE:VMW), and S&P Global Inc. (NYSE:SPGI). All of these stocks’ market caps are similar to PNC’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| ISRG | 41 | 1400552 | 4 |
| ANTM | 59 | 3721999 | -7 |
| VMW | 35 | 985185 | 1 |
| SPGI | 69 | 3925199 | 11 |
| Average | 51 | 2508234 | 2.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 51 hedge funds with bullish positions and the average amount invested in these stocks was $2508 million. That figure was $2074 million in PNC’s case. S&P Global Inc. (NYSE:SPGI) is the most popular stock in this table. On the other hand VMware, Inc. (NYSE:VMW) is the least popular one with only 35 bullish hedge fund positions. PNC Financial Services Group Inc. (NYSE:PNC) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.1% in 2019 through December 23rd and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. A small number of hedge funds were also right about betting on PNC, though not to the same extent, as the stock returned 40.8% in 2019 (as of 12/23) and outperformed the market.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
