Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the first quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 4.5 years and analyze what the smart money thinks of PacWest Bancorp (NASDAQ:PACW) based on that data.
PacWest Bancorp (NASDAQ:PACW) was in 23 hedge funds’ portfolios at the end of March. PACW has experienced a decrease in enthusiasm from smart money of late. There were 31 hedge funds in our database with PACW positions at the end of the previous quarter. Our calculations also showed that PACW 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.
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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 58 percentage points since March 2017 (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 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out trades like this one. 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 the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind we’re going to take a peek at the latest hedge fund action regarding PacWest Bancorp (NASDAQ:PACW).
What does smart money think about PacWest Bancorp (NASDAQ:PACW)?
At the end of the first quarter, a total of 23 of the hedge funds tracked by Insider Monkey were long this stock, a change of -26% from the previous quarter. On the other hand, there were a total of 21 hedge funds with a bullish position in PACW a year ago. With hedge funds’ positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were increasing their stakes meaningfully (or already accumulated large positions).
The largest stake in PacWest Bancorp (NASDAQ:PACW) was held by Cardinal Capital, which reported holding $52 million worth of stock at the end of September. It was followed by Millennium Management with a $13.3 million position. Other investors bullish on the company included Fisher Asset Management, Basswood Capital, and Arrowstreet Capital. In terms of the portfolio weights assigned to each position Cardinal Capital allocated the biggest weight to PacWest Bancorp (NASDAQ:PACW), around 2.56% of its 13F portfolio. Forest Hill Capital is also relatively very bullish on the stock, earmarking 1.38 percent of its 13F equity portfolio to PACW.
Since PacWest Bancorp (NASDAQ:PACW) has witnessed a decline in interest from the smart money, we can see that there exists a select few hedge funds that elected to cut their full holdings heading into Q4. It’s worth mentioning that Paul Marshall and Ian Wace’s Marshall Wace LLP said goodbye to the largest position of the “upper crust” of funds monitored by Insider Monkey, valued at an estimated $14.2 million in stock, and Paul Tudor Jones’s Tudor Investment Corp was right behind this move, as the fund sold off about $1.6 million worth. These transactions are intriguing to say the least, as total hedge fund interest dropped by 8 funds heading into Q4.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as PacWest Bancorp (NASDAQ:PACW) but similarly valued. These stocks are Element Solutions Inc. (NYSE:ESI), PotlatchDeltic Corporation (NASDAQ:PCH), John Wiley & Sons Inc (NYSE:JW), and Webster Financial Corporation (NYSE:WBS). This group of stocks’ market valuations are closest to PACW’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 25.25 hedge funds with bullish positions and the average amount invested in these stocks was $225 million. That figure was $122 million in PACW’s case. Element Solutions Inc. (NYSE:ESI) is the most popular stock in this table. On the other hand PotlatchDeltic Corporation (NASDAQ:PCH) is the least popular one with only 16 bullish hedge fund positions. PacWest Bancorp (NASDAQ:PACW) 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 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 gained 13.9% in 2020 through June 10th and surpassed the market by 14.2 percentage points. Unfortunately PACW wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); PACW investors were disappointed as the stock returned 18.6% during the second 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 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
Disclosure: None. This article was originally published at Insider Monkey.