In this article you are going to find out whether hedge funds think Pampa Energia S.A. (NYSE:PAM) is a good investment right now. We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It’s not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.
Is PAM a good stock to buy now? Prominent investors were in a bearish mood. The number of long hedge fund positions decreased by 2 lately. Pampa Energia S.A. (NYSE:PAM) was in 8 hedge funds’ portfolios at the end of September. The all time high for this statistics is 21. Our calculations also showed that PAM isn’t among the 30 most popular stocks among hedge funds (click for Q3 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 66 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 13% through November 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
James Dondero of Highland Capital Management
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 5 best cheap stocks to buy according to Ray Dalio to identify stocks with upside potential. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. With all of this in mind let’s view the key hedge fund action encompassing Pampa Energia S.A. (NYSE:PAM).
What have hedge funds been doing with Pampa Energia S.A. (NYSE:PAM)?
At the end of the third quarter, a total of 8 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -20% from the previous quarter. On the other hand, there were a total of 10 hedge funds with a bullish position in PAM a year ago. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, OZ Management was the largest shareholder of Pampa Energia S.A. (NYSE:PAM), with a stake worth $17.9 million reported as of the end of September. Trailing OZ Management was Oaktree Capital Management, which amassed a stake valued at $8.8 million. Arrowstreet Capital, Citadel Investment Group, and Highland Capital Management 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 Oaktree Capital Management allocated the biggest weight to Pampa Energia S.A. (NYSE:PAM), around 0.19% of its 13F portfolio. Highland Capital Management is also relatively very bullish on the stock, setting aside 0.16 percent of its 13F equity portfolio to PAM.
Because Pampa Energia S.A. (NYSE:PAM) has witnessed a decline in interest from the entirety of the hedge funds we track, it’s safe to say that there is a sect of hedge funds who were dropping their full holdings by the end of the third quarter. Interestingly, Renaissance Technologies sold off the largest stake of all the hedgies tracked by Insider Monkey, totaling close to $0.6 million in stock. Ryan Tolkin (CIO)’s fund, Schonfeld Strategic Advisors, also dropped its stock, about $0.1 million worth. These transactions are interesting, as total hedge fund interest dropped by 2 funds by the end of the third quarter.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Pampa Energia S.A. (NYSE:PAM) but similarly valued. We will take a look at Century Aluminum Co (NASDAQ:CENX), Denny’s Corporation (NASDAQ:DENN), Ebix Inc (NASDAQ:EBIX), Lumber Liquidators Holdings Inc (NYSE:LL), G-III Apparel Group, Ltd. (NASDAQ:GIII), Albireo Pharma, Inc. (NASDAQ:ALBO), and Transportadora de Gas del Sur SA (NYSE:TGS). This group of stocks’ market valuations are similar to PAM’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CENX | 11 | 35940 | -1 |
| DENN | 20 | 65004 | -3 |
| EBIX | 13 | 50750 | -4 |
| LL | 14 | 61499 | 5 |
| GIII | 16 | 45316 | 6 |
| ALBO | 22 | 220205 | 10 |
| TGS | 6 | 9871 | 1 |
| Average | 14.6 | 69798 | 2 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 14.6 hedge funds with bullish positions and the average amount invested in these stocks was $70 million. That figure was $31 million in PAM’s case. Albireo Pharma, Inc. (NASDAQ:ALBO) is the most popular stock in this table. On the other hand Transportadora de Gas del Sur SA (NYSE:TGS) is the least popular one with only 6 bullish hedge fund positions. Pampa Energia S.A. (NYSE:PAM) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for PAM is 20.7. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 31.6% in 2020 through December 2nd and still beat the market by 16 percentage points. A small number of hedge funds were also right about betting on PAM as the stock returned 37.3% since the end of the third quarter (through 12/2) and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.
