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 second 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 5 years and analyze what the smart money thinks of PotlatchDeltic Corporation (NASDAQ:PCH) based on that data and determine whether they were really smart about the stock.
Is PotlatchDeltic Corporation (NASDAQ:PCH) a buy here? Investors who are in the know were buying. The number of bullish hedge fund positions advanced by 6 in recent months. PotlatchDeltic Corporation (NASDAQ:PCH) was in 22 hedge funds’ portfolios at the end of the second quarter of 2020. The all time high for this statistics is 20. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that PCH isn’t among the 30 most popular stocks among hedge funds (click for Q2 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.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 more than 56 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. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost precious metals prices. So, we are checking out this lithium company which could also benefit from the electric car adoption. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. 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 website to get excerpts of these letters in your inbox. With all of this in mind we’re going to take a peek at the fresh hedge fund action encompassing PotlatchDeltic Corporation (NASDAQ:PCH).
How are hedge funds trading PotlatchDeltic Corporation (NASDAQ:PCH)?
At the end of June, a total of 22 of the hedge funds tracked by Insider Monkey were long this stock, a change of 38% from the previous quarter. The graph below displays the number of hedge funds with bullish position in PCH over the last 20 quarters. With hedgies’ sentiment swirling, there exists an “upper tier” of key hedge fund managers who were boosting their stakes considerably (or already accumulated large positions).
Among these funds, Southeastern Asset Management held the most valuable stake in PotlatchDeltic Corporation (NASDAQ:PCH), which was worth $127.5 million at the end of the third quarter. On the second spot was Renaissance Technologies which amassed $92.9 million worth of shares. Ancora Advisors, Intrinsic Edge Capital, and Arrowstreet 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 Southeastern Asset Management allocated the biggest weight to PotlatchDeltic Corporation (NASDAQ:PCH), around 3.18% of its 13F portfolio. Intrepid Capital Management is also relatively very bullish on the stock, setting aside 2.41 percent of its 13F equity portfolio to PCH.
As aggregate interest increased, key hedge funds have jumped into PotlatchDeltic Corporation (NASDAQ:PCH) headfirst. Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, assembled the most outsized position in PotlatchDeltic Corporation (NASDAQ:PCH). Arrowstreet Capital had $6.4 million invested in the company at the end of the quarter. Ken Heebner’s Capital Growth Management also made a $3.4 million investment in the stock during the quarter. The following funds were also among the new PCH investors: Israel Englander’s Millennium Management, Paul Tudor Jones’s Tudor Investment Corp, and Donald Sussman’s Paloma Partners.
Let’s now review hedge fund activity in other stocks similar to PotlatchDeltic Corporation (NASDAQ:PCH). These stocks are Taro Pharmaceutical Industries Ltd. (NYSE:TARO), Benitec Biopharma Limited (NASDAQ:BNTC), Home Bancshares Inc (NASDAQ:HOMB), CVB Financial Corp. (NASDAQ:CVBF), Merit Medical Systems, Inc. (NASDAQ:MMSI), Spirit AeroSystems Holdings, Inc. (NYSE:SPR), and Workiva Inc (NYSE:WK). This group of stocks’ market caps are similar to PCH’s market cap.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
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As you can see these stocks had an average of 16.1 hedge funds with bullish positions and the average amount invested in these stocks was $185 million. That figure was $278 million in PCH’s case. Spirit AeroSystems Holdings, Inc. (NYSE:SPR) is the most popular stock in this table. On the other hand Benitec Biopharma Limited (NASDAQ:BNTC) is the least popular one with only 1 bullish hedge fund positions. PotlatchDeltic Corporation (NASDAQ:PCH) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for PCH is 69.2. 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. 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 24.8% in 2020 through the end of third quarter and still beat the market by 19.3 percentage points. Hedge funds were also right about betting on PCH as the stock returned 11.8% during Q3 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.