Is Pacific Sunwear of California, Inc. (NASDAQ:PSUN) going to take off soon? Prominent investors are taking a bearish view. The number of bullish hedge fund bets stayed the same which is a slightly negative development in our experience.
If you’d ask most shareholders, hedge funds are perceived as worthless, outdated investment tools of years past. While there are over 8000 funds in operation today, we look at the crème de la crème of this group, close to 450 funds. It is widely believed that this group controls the majority of the smart money’s total asset base, and by watching their best investments, we have brought to light a number of investment strategies that have historically beaten the market. Our small-cap hedge fund strategy outpaced the S&P 500 index by 18 percentage points annually for a decade in our back tests, and since we’ve started sharing our picks with our subscribers at the end of August 2012, we have outperformed the S&P 500 index by 24 percentage points in 7 months (check out a sample of our picks).
Keeping this in mind, it’s important to take a look at the recent action surrounding Pacific Sunwear of California, Inc. (NASDAQ:PSUN).
Hedge fund activity in Pacific Sunwear of California, Inc. (NASDAQ:PSUN)
At the end of the fourth quarter, a total of 9 of the hedge funds we track were long in this stock, a change of 0% from the third quarter. With the smart money’s positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were upping their stakes significantly.
When looking at the hedgies we track, Adage Capital Management, managed by Phill Gross and Robert Atchinson, holds the largest position in Pacific Sunwear of California, Inc. (NASDAQ:PSUN). Adage Capital Management has a $15.8 million position in the stock, comprising 0.1% of its 13F portfolio. The second largest stake is held by Chuck Royce of Royce & Associates, with a $1.4 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Remaining hedge funds that hold long positions include Peter A. Wright’s P.A.W. CAPITAL PARTNERS, D. E. Shaw’s D E Shaw and Jim Simons’s Renaissance Technologies.
Judging by the fact that Pacific Sunwear of California, Inc. (NASDAQ:PSUN) has experienced declining sentiment from the entirety of the hedge funds we track, it’s easy to see that there exists a select few hedgies who sold off their entire stakes in Q4. At the top of the heap, Ben Levine, Andrew Manuel and Stefan Renold’s LMR Partners said goodbye to the largest stake of the 450+ funds we key on, totaling close to $0.2 million in stock. Steven Cohen’s fund, SAC Capital Advisors, also sold off its stock, about $0.1 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).
How have insiders been trading Pacific Sunwear of California, Inc. (NASDAQ:PSUN)?
Insider buying is at its handiest when the company in focus has seen transactions within the past 180 days. Over the latest 180-day time frame, Pacific Sunwear of California, Inc. (NASDAQ:PSUN) has seen zero unique insiders buying, and zero insider sales (see the details of insider trades here).
Let’s also review hedge fund and insider activity in other stocks similar to Pacific Sunwear of California, Inc. (NASDAQ:PSUN). These stocks are Christopher & Banks Corporation (NYSE:CBK), Cherokee Inc. (NASDAQ:CHKE), Citi Trends, Inc. (NASDAQ:CTRN), and Body Central Corp (NASDAQ:BODY). This group of stocks are the members of the apparel stores industry and their market caps are similar to PSUN’s market cap.
| Company Name | # of Hedge Funds | # of Insiders Buying | # of Insiders Selling |
| Christopher & Banks Corporation (NYSE:CBK) | 13 | 6 | 2 |
| Cherokee Inc. (NASDAQ:CHKE) | 3 | 0 | 1 |
| Citi Trends, Inc. (NASDAQ:CTRN) | 7 | 1 | 0 |
| Body Central Corp (NASDAQ:BODY) | 9 | 1 | 0 |
With the results demonstrated by the aforementioned studies, retail investors must always pay attention to hedge fund and insider trading sentiment, and Pacific Sunwear of California, Inc. (NASDAQ:PSUN) shareholders fit into this picture quite nicely.
