Hedge Funds Are Selling PPL Corporation (PPL)

Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the first quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 4.5 years and analyze what the smart money thinks of PPL Corporation (NYSE:PPL) based on that data.

Is PPL Corporation (NYSE:PPL) a buy right now? Investors who are in the know are taking a pessimistic view. The number of bullish hedge fund positions were trimmed by 4 recently. Our calculations also showed that PPL 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.

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.

Zilvinas Zach Mecelis Covalis Capital

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out trades like this one as well as this tiny lithium play. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now we’re going to take a look at the latest hedge fund action regarding PPL Corporation (NYSE:PPL).

What have hedge funds been doing with PPL Corporation (NYSE:PPL)?

At Q1’s end, a total of 28 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -13% from the fourth quarter of 2019. By comparison, 22 hedge funds held shares or bullish call options in PPL a year ago. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is PPL A Good Stock To Buy?

The largest stake in PPL Corporation (NYSE:PPL) was held by Renaissance Technologies, which reported holding $91.9 million worth of stock at the end of September. It was followed by Covalis Capital with a $37.5 million position. Other investors bullish on the company included Millennium Management, Adage Capital Management, and Electron Capital Partners. In terms of the portfolio weights assigned to each position Covalis Capital allocated the biggest weight to PPL Corporation (NYSE:PPL), around 17.25% of its 13F portfolio. Electron Capital Partners is also relatively very bullish on the stock, designating 7.66 percent of its 13F equity portfolio to PPL.

Seeing as PPL Corporation (NYSE:PPL) has faced declining sentiment from hedge fund managers, it’s safe to say that there were a few fund managers who were dropping their entire stakes by the end of the first quarter. At the top of the heap, Clint Carlson’s Carlson Capital dumped the largest investment of the “upper crust” of funds tracked by Insider Monkey, comprising close to $36 million in stock, and Jonathan Barrett and Paul Segal’s Luminus Management was right behind this move, as the fund cut about $18.3 million worth. These transactions are intriguing to say the least, as total hedge fund interest dropped by 4 funds by the end of the first quarter.

Let’s also examine hedge fund activity in other stocks similar to PPL Corporation (NYSE:PPL). These stocks are Hilton Worldwide Holdings Inc (NYSE:HLT), State Street Corporation (NYSE:STT), Sun Life Financial Inc. (NYSE:SLF), and Franco-Nevada Corporation (NYSE:FNV). All of these stocks’ market caps resemble PPL’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
HLT 43 3133178 -14
STT 34 503359 -11
SLF 16 102769 0
FNV 21 896434 -3
Average 28.5 1158935 -7

View table here if you experience formatting issues.

As you can see these stocks had an average of 28.5 hedge funds with bullish positions and the average amount invested in these stocks was $1159 million. That figure was $312 million in PPL’s case. Hilton Worldwide Holdings Inc (NYSE:HLT) is the most popular stock in this table. On the other hand Sun Life Financial Inc. (NYSE:SLF) is the least popular one with only 16 bullish hedge fund positions. PPL Corporation (NYSE:PPL) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and 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 8.3% in 2020 through the end of May and surpassed the market by 13.2 percentage points. Unfortunately PPL wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); PPL investors were disappointed as the stock returned 13.2% 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 in 2020.

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