In this article we will take a look at whether hedge funds think Pacific Ethanol Inc (NASDAQ:PEIX) is a good investment right now. We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, unconventional data sources, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.
Hedge fund interest in Pacific Ethanol Inc (NASDAQ:PEIX) shares was flat at the end of last quarter. This is usually a negative indicator. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Continental Materials Corporation (NYSE:CUO), Supercom Ltd (NASDAQ:SPCB), and Ra Medical Systems, Inc. (NYSE:RMED) to gather more data points. Our calculations also showed that PEIX isn’t among the 30 most popular stocks among hedge funds (click for Q1 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.
To the average investor there are tons of gauges stock traders put to use to appraise publicly traded companies. Two of the most innovative gauges are hedge fund and insider trading signals. Our researchers have shown that, historically, those who follow the best picks of the top hedge fund managers can outperform the market by a significant amount (see the details here).
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, legendary investor Bill Miller told investors to sell 7 extremely popular recession stocks last month. So, we went through his list and recommended another stock with 100% upside potential instead. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. 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 take a glance at the key hedge fund action encompassing Pacific Ethanol Inc (NASDAQ:PEIX).
How are hedge funds trading Pacific Ethanol Inc (NASDAQ:PEIX)?
At Q1’s end, a total of 3 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the fourth quarter of 2019. By comparison, 4 hedge funds held shares or bullish call options in PEIX a year ago. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Pacific Ethanol Inc (NASDAQ:PEIX) was held by Renaissance Technologies, which reported holding $0.7 million worth of stock at the end of September. It was followed by Citadel Investment Group with a $0 million position. The only other hedge fund that is bullish on the company was Citadel Investment Group.
Earlier we told you that the aggregate hedge fund interest in the stock was unchanged and we view this as a negative development. Even though there weren’t any hedge funds dumping their holdings during the third quarter, there weren’t any hedge funds initiating brand new positions. This indicates that hedge funds, at the very best, perceive this stock as dead money and they haven’t identified any viable catalysts that can attract investor attention.
Let’s also examine hedge fund activity in other stocks similar to Pacific Ethanol Inc (NASDAQ:PEIX). We will take a look at Continental Materials Corporation (NYSE:CUO), Supercom Ltd (NASDAQ:SPCB), Ra Medical Systems, Inc. (NYSE:RMED), and Ocugen, Inc. (NASDAQ:OCGN). This group of stocks’ market valuations are closest to PEIX’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 1.75 hedge funds with bullish positions and the average amount invested in these stocks was $0 million. That figure was $1 million in PEIX’s case. Continental Materials Corporation (NYSE:CUO) is the most popular stock in this table. On the other hand Supercom Ltd (NASDAQ:SPCB) is the least popular one with only 1 bullish hedge fund positions. Compared to these stocks Pacific Ethanol Inc (NASDAQ:PEIX) is more popular among hedge funds. 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 returned 7.9% in 2020 through May 22nd but still managed to beat the market by 15.6 percentage points. Hedge funds were also right about betting on PEIX as the stock returned 126.9% so far in Q2 (through May 22nd) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.
Disclosure: None. This article was originally published at Insider Monkey.