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Hedge Funds Aren’t Done Buying PolyOne Corporation (POL)

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 PolyOne Corporation (NYSE:POL) based on that data.

PolyOne Corporation (NYSE:POL) was in 28 hedge funds’ portfolios at the end of the first quarter of 2020. POL has seen an increase in hedge fund interest lately. There were 24 hedge funds in our database with POL holdings at the end of the previous quarter. Our calculations also showed that POL 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 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 S&P 500 ETFs by 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 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.

Lee Ainslie MAVERICK CAPITAL

Lee Ainslie of Maverick 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 peek at the recent hedge fund action encompassing PolyOne Corporation (NYSE:POL).

What does smart money think about PolyOne Corporation (NYSE:POL)?

At the end of the first quarter, a total of 28 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 17% from the previous quarter. By comparison, 23 hedge funds held shares or bullish call options in POL a year ago. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is POL A Good Stock To Buy?

The largest stake in PolyOne Corporation (NYSE:POL) was held by Millennium Management, which reported holding $23.7 million worth of stock at the end of September. It was followed by D E Shaw with a $23.2 million position. Other investors bullish on the company included AQR Capital Management, Adage Capital Management, and Citadel Investment Group. In terms of the portfolio weights assigned to each position Barington Capital Group allocated the biggest weight to PolyOne Corporation (NYSE:POL), around 5.71% of its 13F portfolio. Appian Way Asset Management is also relatively very bullish on the stock, dishing out 2.85 percent of its 13F equity portfolio to POL.

With a general bullishness amongst the heavyweights, key hedge funds were breaking ground themselves. Scopus Asset Management, managed by Alexander Mitchell, initiated the most valuable position in PolyOne Corporation (NYSE:POL). Scopus Asset Management had $9.5 million invested in the company at the end of the quarter. Thomas E. Claugus’s GMT Capital also initiated a $6.9 million position during the quarter. The following funds were also among the new POL investors: Andrew Byington’s Appian Way Asset Management, Lee Ainslie’s Maverick Capital, and Peter Muller’s PDT Partners.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as PolyOne Corporation (NYSE:POL) but similarly valued. We will take a look at International Bancshares Corp (NASDAQ:IBOC), Baozun Inc (NASDAQ:BZUN), NetScout Systems, Inc. (NASDAQ:NTCT), and WPX Energy Inc (NYSE:WPX). This group of stocks’ market caps are closest to POL’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
IBOC 16 96910 -4
BZUN 12 35603 -3
NTCT 12 82203 -8
WPX 29 411632 -15
Average 17.25 156587 -7.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 17.25 hedge funds with bullish positions and the average amount invested in these stocks was $157 million. That figure was $165 million in POL’s case. WPX Energy Inc (NYSE:WPX) is the most popular stock in this table. On the other hand Baozun Inc (NASDAQ:BZUN) is the least popular one with only 12 bullish hedge fund positions. PolyOne Corporation (NYSE:POL) is not the most popular stock in this group but hedge fund interest is still above average. 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 but still beat the market by 13.2 percentage points. Hedge funds were also right about betting on POL as the stock returned 30.6% in Q2 (through the end of May) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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