Hedge Funds Are Cashing Out Of Pinnacle Financial Partners (PNFP)

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. Insider Monkey finished processing more than 750 13F filings submitted by hedge funds and prominent investors. These filings show these funds’ portfolio positions as of September 30th, 2019. In this article we are going to take a look at smart money sentiment towards Pinnacle Financial Partners (NASDAQ:PNFP).

Is Pinnacle Financial Partners (NASDAQ:PNFP) a buy, sell, or hold? Money managers are reducing their bets on the stock. The number of long hedge fund bets went down by 3 lately. Our calculations also showed that PNFP isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to 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 has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.

Ken Griffin

Ken Griffin of Citadel Investment Group

We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. 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 also rely on the best performing hedge funds‘ buy/sell signals. We’re going to review the new hedge fund action regarding Pinnacle Financial Partners (NASDAQ:PNFP).

What does smart money think about Pinnacle Financial Partners (NASDAQ:PNFP)?

At Q3’s end, a total of 15 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -17% from the second quarter of 2019. By comparison, 13 hedge funds held shares or bullish call options in PNFP 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.

Is PNFP A Good Stock To Buy?

The largest stake in Pinnacle Financial Partners (NASDAQ:PNFP) was held by 12th Street Asset Management, which reported holding $20.6 million worth of stock at the end of September. It was followed by Citadel Investment Group with a $14.3 million position. Other investors bullish on the company included Forest Hill Capital, Elizabeth Park Capital Management, and Mendon Capital Advisors. In terms of the portfolio weights assigned to each position 12th Street Asset Management allocated the biggest weight to Pinnacle Financial Partners (NASDAQ:PNFP), around 5.45% of its 13F portfolio. Elizabeth Park Capital Management is also relatively very bullish on the stock, setting aside 5.17 percent of its 13F equity portfolio to PNFP.

Judging by the fact that Pinnacle Financial Partners (NASDAQ:PNFP) has faced declining sentiment from the smart money, we can see that there is a sect of fund managers that elected to cut their positions entirely by the end of the third quarter. Intriguingly, Matthew Lindenbaum’s Basswood Capital said goodbye to the largest position of all the hedgies followed by Insider Monkey, worth about $1.8 million in stock, and Paul Hondros’s AlphaOne Capital Partners was right behind this move, as the fund said goodbye to about $1.1 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest was cut by 3 funds by the end of the third quarter.

Let’s now take a look at hedge fund activity in other stocks similar to Pinnacle Financial Partners (NASDAQ:PNFP). We will take a look at Companhia Siderurgica Nacional (NYSE:SID), Littelfuse, Inc. (NASDAQ:LFUS), Sabra Health Care REIT Inc (NASDAQ:SBRA), and TriNet Group Inc (NYSE:TNET). This group of stocks’ market valuations are closest to PNFP’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
SID 7 18261 -3
LFUS 18 270623 3
SBRA 10 99601 0
TNET 18 419054 -3
Average 13.25 201885 -0.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 13.25 hedge funds with bullish positions and the average amount invested in these stocks was $202 million. That figure was $85 million in PNFP’s case. Littelfuse, Inc. (NASDAQ:LFUS) is the most popular stock in this table. On the other hand Companhia Siderurgica Nacional (NYSE:SID) is the least popular one with only 7 bullish hedge fund positions. Pinnacle Financial Partners (NASDAQ:PNFP) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Hedge funds were also right about betting on PNFP, though not to the same extent, as the stock returned 8.5% during the first two months of the fourth quarter and outperformed the market as well.

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