A whopping number of 13F filings filed with U.S. Securities and Exchange Commission has been processed by Insider Monkey so that individual investors can look at the overall hedge fund sentiment towards the stocks included in their watchlists. These freshly-submitted public filings disclose money managers’ equity positions as of the end of the three-month period that ended March 31, so let’s proceed with the discussion of the hedge fund sentiment on Packaging Corporation Of America (NYSE:PKG).
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 market by 40 percentage points since May 2014 through May 30, 2019 (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.
We’re going to take a glance at the key hedge fund action surrounding Packaging Corporation Of America (NYSE:PKG).
Hedge fund activity in Packaging Corporation Of America (NYSE:PKG)
At the end of the first quarter, a total of 26 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -21% from the fourth quarter of 2018. The graph below displays the number of hedge funds with bullish position in PKG over the last 15 quarters. With hedge funds’ positions undergoing their usual ebb and flow, there exists an “upper tier” of key hedge fund managers who were upping their holdings substantially (or already accumulated large positions).
More specifically, AQR Capital Management was the largest shareholder of Packaging Corporation Of America (NYSE:PKG), with a stake worth $65.7 million reported as of the end of March. Trailing AQR Capital Management was Millennium Management, which amassed a stake valued at $46.9 million. MD Sass, GLG Partners, and Adage Capital Management were also very fond of the stock, giving the stock large weights in their portfolios.
Because Packaging Corporation Of America (NYSE:PKG) has witnessed a decline in interest from hedge fund managers, it’s safe to say that there exists a select few fund managers who sold off their positions entirely heading into Q3. It’s worth mentioning that David Cohen and Harold Levy’s Iridian Asset Management said goodbye to the largest stake of the 700 funds followed by Insider Monkey, valued at close to $5.6 million in stock, and Matthew Tewksbury’s Stevens Capital Management was right behind this move, as the fund said goodbye to about $5.4 million worth. These moves are intriguing to say the least, as total hedge fund interest fell by 7 funds heading into Q3.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Packaging Corporation Of America (NYSE:PKG) but similarly valued. We will take a look at PG&E Corporation (NYSE:PCG), Erie Indemnity Company (NASDAQ:ERIE), F5 Networks, Inc. (NASDAQ:FFIV), and Okta, Inc. (NASDAQ:OKTA). All of these stocks’ market caps resemble PKG’s market cap.
|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 39 hedge funds with bullish positions and the average amount invested in these stocks was $1732 million. That figure was $212 million in PKG’s case. PG&E Corporation (NYSE:PCG) is the most popular stock in this table. On the other hand Erie Indemnity Company (NASDAQ:ERIE) is the least popular one with only 17 bullish hedge fund positions. Packaging Corporation Of America (NYSE:PKG) 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 1.9% in Q2 through May 30th and outperformed the S&P 500 ETF (SPY) by more than 3 percentage points. Unfortunately PKG wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); PKG investors were disappointed as the stock returned -10.1% 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 13 of these stocks already outperformed the market so far in Q2.
Disclosure: None. This article was originally published at Insider Monkey.