We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession.
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. 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. We at Insider Monkey have plowed through 835 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of December 31st. In this article we look at what those investors think of PPL Corporation (NYSE:PPL).
PPL Corporation (NYSE:PPL) has seen an increase in activity from the world’s largest hedge funds recently. Our calculations also showed that PPL isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video below for Q3 rankings).
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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 41 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 35.3% through March 3rd. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind we’re going to review the recent hedge fund action encompassing PPL Corporation (NYSE:PPL).
How are hedge funds trading PPL Corporation (NYSE:PPL)?
At the end of the fourth quarter, a total of 32 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 19% from the third quarter of 2019. Below, you can check out the change in hedge fund sentiment towards PPL over the last 18 quarters. With hedge funds’ positions undergoing their usual ebb and flow, there exists an “upper tier” of noteworthy hedge fund managers who were boosting their stakes considerably (or already accumulated large positions).
Among these funds, Citadel Investment Group held the most valuable stake in PPL Corporation (NYSE:PPL), which was worth $144.9 million at the end of the third quarter. On the second spot was Renaissance Technologies which amassed $142.7 million worth of shares. Point72 Asset Management, AQR Capital Management, and Carlson Capital 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 Blackstart Capital allocated the biggest weight to PPL Corporation (NYSE:PPL), around 3.27% of its 13F portfolio. Luminus Management is also relatively very bullish on the stock, dishing out 0.76 percent of its 13F equity portfolio to PPL.
As industrywide interest jumped, key money managers were breaking ground themselves. Carlson Capital, managed by Clint Carlson, assembled the most valuable position in PPL Corporation (NYSE:PPL). Carlson Capital had $36 million invested in the company at the end of the quarter. Jonathan Barrett and Paul Segal’s Luminus Management also made a $18.3 million investment in the stock during the quarter. The other funds with brand new PPL positions are Michael Kharitonov and Jon David McAuliffe’s Voleon Capital, Parvinder Thiara’s Athanor Capital, and Philippe Laffont’s Coatue Management.
Let’s check out hedge fund activity in other stocks similar to PPL Corporation (NYSE:PPL). These stocks are ViacomCBS Inc. (NASDAQ:VIAC), Archer Daniels Midland Company (NYSE:ADM), Fortive Corporation (NYSE:FTV), and Stanley Black & Decker, Inc. (NYSE:SWK). This group of stocks’ market valuations match PPL’s market valuation.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 44 hedge funds with bullish positions and the average amount invested in these stocks was $1716 million. That figure was $599 million in PPL’s case. ViacomCBS Inc. (NASDAQ:VIAC) is the most popular stock in this table. On the other hand Archer Daniels Midland Company (NYSE:ADM) is the least popular one with only 28 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 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 11.7% in 2020 through March 11th but beat the market by 3.1 percentage points. Unfortunately PPL wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); PPL investors were disappointed as the stock returned -17.4% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as most of these stocks already outperformed the market in Q1.
Disclosure: None. This article was originally published at Insider Monkey.