Hedge Funds Were Selling Prudential Public Limited Company (PUK) Even Before Coronavirus

Coronavirus is probably the #1 concern in investors’ minds right now. It should be. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW. We predicted that a US recession is imminent and US stocks will go down by at least 20% in the next 3-6 months. We also told you to short the market ETFs and buy long-term bonds. Investors who agreed with us and replicated these trades are up double digits whereas the market is down double digits. Our article also called for a total international travel ban to prevent the spread of the coronavirus especially from Europe. We were one step ahead of the markets and the president.

In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. Although the masses and most of the financial media blame hedge funds for their exorbitant fee structure and disappointing performance, these investors have proved to have great stock picking abilities over the years (that’s why their assets under management continue to swell). We believe hedge fund sentiment should serve as a crucial tool of an individual investor’s stock selection process, as it may offer great insights of how the brightest minds of the finance industry feel about specific stocks. After all, these people have access to smartest analysts and expensive data/information sources that individual investors can’t match. So should one consider investing in Prudential Public Limited Company (NYSE:PUK)? The smart money sentiment can provide an answer to this question.

Is Prudential Public Limited Company (NYSE:PUK) ready to rally soon? Money managers are becoming less confident. The number of bullish hedge fund bets were cut by 6 lately. Our calculations also showed that PUK isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video below for Q3 rankings).
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

Today there are a multitude of methods stock traders can use to evaluate their holdings. A duo of the most underrated methods are hedge fund and insider trading indicators. Our experts have shown that, historically, those who follow the top picks of the best investment managers can outclass the market by a solid margin (see the details here).


Jim Simons of Renaissance Technologies

We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. In January, we recommended a long position in one of the most shorted stocks in the market, and that stock returned more than 50% despite the large losses in the market since our recommendation. Now we’re going to view the fresh hedge fund action surrounding Prudential Public Limited Company (NYSE:PUK).

How have hedgies been trading Prudential Public Limited Company (NYSE:PUK)?

At the end of the fourth quarter, a total of 6 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -50% from one quarter earlier. By comparison, 9 hedge funds held shares or bullish call options in PUK 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 PUK A Good Stock To Buy?

The largest stake in Prudential Public Limited Company (NYSE:PUK) was held by Renaissance Technologies, which reported holding $42.6 million worth of stock at the end of September. It was followed by Arrowstreet Capital with a $1.9 million position. Other investors bullish on the company included Marshall Wace LLP, McKinley Capital Management, and Point72 Asset Management. In terms of the portfolio weights assigned to each position McKinley Capital Management allocated the biggest weight to Prudential Public Limited Company (NYSE:PUK), around 0.06% of its 13F portfolio. Renaissance Technologies is also relatively very bullish on the stock, dishing out 0.03 percent of its 13F equity portfolio to PUK.

Because Prudential Public Limited Company (NYSE:PUK) has witnessed falling interest from the aggregate hedge fund industry, we can see that there were a few fund managers that decided to sell off their entire stakes in the third quarter. Intriguingly, D. E. Shaw’s D E Shaw dumped the largest position of all the hedgies tracked by Insider Monkey, comprising close to $2.8 million in stock, and Ken Griffin’s Citadel Investment Group was right behind this move, as the fund dumped about $1.1 million worth. These moves are important to note, as total hedge fund interest fell by 6 funds in the third quarter.

Let’s now take a look at hedge fund activity in other stocks similar to Prudential Public Limited Company (NYSE:PUK). These stocks are Bank of Montreal (NYSE:BMO), Marriott International Inc (NYSE:MAR), Phillips 66 (NYSE:PSX), and Relx PLC (NYSE:RELX). This group of stocks’ market caps resemble PUK’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
BMO 13 224601 -2
MAR 37 2944131 -8
PSX 46 944856 10
RELX 7 99457 1
Average 25.75 1053261 0.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 25.75 hedge funds with bullish positions and the average amount invested in these stocks was $1053 million. That figure was $47 million in PUK’s case. Phillips 66 (NYSE:PSX) is the most popular stock in this table. On the other hand Relx PLC (NYSE:RELX) is the least popular one with only 7 bullish hedge fund positions. Compared to these stocks Prudential Public Limited Company (NYSE:PUK) is even less popular than RELX. Hedge funds dodged a bullet by taking a bearish stance towards PUK. Our calculations showed that the top 20 most popular hedge fund stocks 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 managed to beat the market by 3.1 percentage points. Unfortunately PUK wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); PUK investors were disappointed as the stock returned -30.3% 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 so far in Q1.

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