Hedge Funds Are Souring On PACCAR Inc (PCAR)

In this article we will check out the progression of hedge fund sentiment towards PACCAR Inc (NASDAQ:PCAR) and determine whether it is a good investment right now. We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also employ numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.

Is PACCAR Inc (NASDAQ:PCAR) a sound investment now? Money managers were becoming less hopeful. The number of long hedge fund positions went down by 6 recently. PACCAR Inc (NASDAQ:PCAR) was in 28 hedge funds’ portfolios at the end of March. The all time high for this statistic is 38. Our calculations also showed that PCAR isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).

To most traders, hedge funds are assumed to be unimportant, outdated investment vehicles of yesteryear. While there are greater than 8000 funds trading today, Our researchers look at the aristocrats of this club, approximately 850 funds. It is estimated that this group of investors manage the lion’s share of the hedge fund industry’s total capital, and by watching their inimitable equity investments, Insider Monkey has found numerous investment strategies that have historically outperformed Mr. Market. Insider Monkey’s flagship short hedge fund strategy defeated the S&P 500 short ETFs by around 20 percentage points per annum since its inception in March 2017. Also, our monthly newsletter’s portfolio of long stock picks returned 206.8% since March 2017 (through May 2021) and beat the S&P 500 Index by more than 115 percentage points. You can download a sample issue of this newsletter on our website .

Millennium Management, Catapult Capital Management

Israel Englander of Millennium Management

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, economists warn of inflation flare up. So, we are checking out this backdoor gold play that has hit peak gains of 718% in a little over a year. We go through lists like the 10 best battery stocks to pick the next Tesla that will deliver a 10x return. 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. You can subscribe to our free daily newsletter on our homepage. Keeping this in mind we’re going to check out the key hedge fund action surrounding PACCAR Inc (NASDAQ:PCAR).

Do Hedge Funds Think PCAR Is A Good Stock To Buy Now?

At the end of March, a total of 28 of the hedge funds tracked by Insider Monkey were long this stock, a change of -18% from the previous quarter. On the other hand, there were a total of 38 hedge funds with a bullish position in PCAR a year ago. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is PCAR A Good Stock To Buy?

Among these funds, ARK Investment Management held the most valuable stake in PACCAR Inc (NASDAQ:PCAR), which was worth $293.4 million at the end of the fourth quarter. On the second spot was AQR Capital Management which amassed $109.8 million worth of shares. Millennium Management, Adage Capital Management, and Citadel Investment Group 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 AlphaCrest Capital Management allocated the biggest weight to PACCAR Inc (NASDAQ:PCAR), around 0.62% of its 13F portfolio. TwinBeech Capital is also relatively very bullish on the stock, dishing out 0.61 percent of its 13F equity portfolio to PCAR.

Because PACCAR Inc (NASDAQ:PCAR) has experienced bearish sentiment from the smart money, we can see that there was a specific group of funds who were dropping their positions entirely by the end of the first quarter. At the top of the heap, Alexander Mitchell’s Scopus Asset Management dumped the largest stake of all the hedgies tracked by Insider Monkey, worth close to $4.7 million in stock. Ray Dalio’s fund, Bridgewater Associates, also dropped its stock, about $3.2 million worth. These transactions are important to note, as aggregate hedge fund interest fell by 6 funds by the end of the first quarter.

Let’s now review hedge fund activity in other stocks similar to PACCAR Inc (NASDAQ:PCAR). These stocks are TransDigm Group Incorporated (NYSE:TDG), Brown-Forman Corporation (NYSE:BF), Suncor Energy Inc. (NYSE:SU), BeiGene, Ltd. (NASDAQ:BGNE), Archer Daniels Midland Company (NYSE:ADM), Motorola Solutions Inc (NYSE:MSI), and Republic Services, Inc. (NYSE:RSG). This group of stocks’ market valuations are closest to PCAR’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
TDG 62 6290864 -2
BF 35 1477271 6
SU 33 1047702 8
BGNE 19 6242377 -2
ADM 34 696043 -1
MSI 29 1000522 -6
RSG 36 1073744 0
Average 35.4 2546932 0.4

View table here if you experience formatting issues.

As you can see these stocks had an average of 35.4 hedge funds with bullish positions and the average amount invested in these stocks was $2547 million. That figure was $626 million in PCAR’s case. TransDigm Group Incorporated (NYSE:TDG) is the most popular stock in this table. On the other hand BeiGene, Ltd. (NASDAQ:BGNE) is the least popular one with only 19 bullish hedge fund positions. PACCAR Inc (NASDAQ:PCAR) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for PCAR is 31.6. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 24% in 2021 through July 9th and surpassed the market again by 6.7 percentage points. Unfortunately PCAR wasn’t nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); PCAR investors were disappointed as the stock returned -5.5% since the end of March (through 7/9) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2021.

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