Before putting in our own effort and resources into finding a good investment, we can quickly utilize hedge fund expertise to give us a quick glimpse of whether that stock could make for a good addition to our portfolios. The odds are not exactly stacked in investors’ favor when it comes to beating the market, as evidenced by the fact that less than 49% of the stocks in the S&P 500 did so during the third quarter. The stats were even worse in recent years when most of the advances in the market were due to large gains by FAANG stocks. However, one bright side for individual investors was the strong performance of hedge funds’ top consensus picks. This year hedge funds’ top 20 stock picks outperformed the S&P 500 Index by 9.9 percentage points through the end of November. Thus, we can see that the tireless research and efforts of hedge funds to identify winning stocks can work to our advantage when we know how to use the data. While not all of their picks will be winners, our odds are much better following their best stock picks than trying to go it alone.
Penn Virginia Corporation (NASDAQ:PVAC) shareholders have witnessed a decrease in activity from the world’s largest hedge funds in recent months. Our calculations also showed that PVAC isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (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 27.8% through November 21, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Nathaniel August of Mangrove Partners
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. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds‘ buy/sell signals. We’re going to review the recent hedge fund action regarding Penn Virginia Corporation (NASDAQ:PVAC).
What have hedge funds been doing with Penn Virginia Corporation (NASDAQ:PVAC)?
At Q3’s end, a total of 16 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -6% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in PVAC over the last 17 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Mangrove Partners was the largest shareholder of Penn Virginia Corporation (NASDAQ:PVAC), with a stake worth $50.3 million reported as of the end of September. Trailing Mangrove Partners was Strategic Value Partners, which amassed a stake valued at $44.8 million. Silver Point Capital, 683 Capital Partners, and Contrarian 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 Strategic Value Partners allocated the biggest weight to Penn Virginia Corporation (NASDAQ:PVAC), around 11.53% of its 13F portfolio. Mangrove Partners is also relatively very bullish on the stock, earmarking 6.09 percent of its 13F equity portfolio to PVAC.
Because Penn Virginia Corporation (NASDAQ:PVAC) has witnessed declining sentiment from the entirety of the hedge funds we track, logic holds that there were a few hedge funds that elected to cut their full holdings by the end of the third quarter. It’s worth mentioning that Todd J. Kantor’s Encompass Capital Advisors dumped the largest stake of all the hedgies followed by Insider Monkey, worth about $22.1 million in stock. Steve Pattyn’s fund, Yaupon Capital, also sold off its stock, about $2.2 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest dropped by 1 funds by the end of the third quarter.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Penn Virginia Corporation (NASDAQ:PVAC) but similarly valued. These stocks are SI-BONE, Inc. (NASDAQ:SIBN), Maverix Metals Inc. (NYSE:MMX), IES Holdings, Inc. (NASDAQ:IESC), and Progenics Pharmaceuticals, Inc. (NASDAQ:PGNX). This group of stocks’ market values are similar to PVAC’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| SIBN | 7 | 38943 | -2 |
| MMX | 1 | 963 | 0 |
| IESC | 8 | 275175 | 3 |
| PGNX | 12 | 69681 | -1 |
| Average | 7 | 96191 | 0 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 7 hedge funds with bullish positions and the average amount invested in these stocks was $96 million. That figure was $184 million in PVAC’s case. Progenics Pharmaceuticals, Inc. (NASDAQ:PGNX) is the most popular stock in this table. On the other hand Maverix Metals Inc. (NYSE:MMX) is the least popular one with only 1 bullish hedge fund positions. Compared to these stocks Penn Virginia Corporation (NASDAQ:PVAC) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately PVAC wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on PVAC were disappointed as the stock returned -16.9% during the first two months of the fourth quarter 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 70 percent of these stocks already outperformed the market in Q4.
Disclosure: None. This article was originally published at Insider Monkey.
