We know that hedge funds generate strong, risk-adjusted returns over the long run, therefore imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, smart money investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do (like Peltz’s recent General Electric losses). However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, as the current round of 13F filings has just ended, let’s examine the smart money sentiment towards Pattern Energy Group Inc (NASDAQ:PEGI).
Is Pattern Energy Group Inc (NASDAQ:PEGI) a splendid stock to buy now? Investors who are in the know are becoming hopeful. The number of bullish hedge fund bets increased by 1 recently. Our calculations also showed that PEGI isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). PEGI was in 13 hedge funds’ portfolios at the end of September. There were 12 hedge funds in our database with PEGI holdings at the end of the previous quarter.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s flagship best performing hedge funds strategy returned 91% since May 2014 and outperformed the Russell 2000 ETFs by nearly 40 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds‘ buy/sell signals. Let’s take a gander at the fresh hedge fund action surrounding Pattern Energy Group Inc (NASDAQ:PEGI).
What does smart money think about Pattern Energy Group Inc (NASDAQ:PEGI)?
Heading into the fourth quarter of 2019, a total of 13 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 8% from one quarter earlier. By comparison, 9 hedge funds held shares or bullish call options in PEGI a year ago. With hedgies’ positions undergoing their usual ebb and flow, there exists an “upper tier” of noteworthy hedge fund managers who were boosting their stakes considerably (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Ecofin Ltd, managed by Bernard Lambilliotte, holds the biggest position in Pattern Energy Group Inc (NASDAQ:PEGI). Ecofin Ltd has a $11.8 million position in the stock, comprising 5.4% of its 13F portfolio. The second largest stake is held by GLG Partners, led by Noam Gottesman, holding a $11.4 million position; less than 0.1%% of its 13F portfolio is allocated to the stock. Some other peers that are bullish consist of Brian Olson, Baehyun Sung, and Jamie Waters’s Blackstart Capital, Brian Ashford-Russell and Tim Woolley’s Polar Capital and David E. Shaw’s D E Shaw. In terms of the portfolio weights assigned to each position Ecofin Ltd allocated the biggest weight to Pattern Energy Group Inc (NASDAQ:PEGI), around 5.35% of its 13F portfolio. Blackstart Capital is also relatively very bullish on the stock, designating 3.23 percent of its 13F equity portfolio to PEGI.
Now, key hedge funds have been driving this bullishness. Blackstart Capital, managed by Brian Olson, Baehyun Sung, and Jamie Waters, created the most valuable position in Pattern Energy Group Inc (NASDAQ:PEGI). Blackstart Capital had $6.1 million invested in the company at the end of the quarter. Michael Gelband’s ExodusPoint Capital also made a $0.8 million investment in the stock during the quarter. The following funds were also among the new PEGI investors: Jonathan Soros’s JS Capital and Gavin Saitowitz and Cisco J. del Valle’s Springbok Capital.
Let’s now take a look at hedge fund activity in other stocks similar to Pattern Energy Group Inc (NASDAQ:PEGI). We will take a look at BlackLine, Inc. (NASDAQ:BL), Genesis Energy, L.P. (NYSE:GEL), Piedmont Office Realty Trust, Inc. (NYSE:PDM), and Monro Muffler Brake Inc (NASDAQ:MNRO). This group of stocks’ market caps resemble PEGI’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| BL | 14 | 125393 | -1 |
| GEL | 2 | 21756 | -2 |
| PDM | 8 | 83825 | -4 |
| MNRO | 16 | 192706 | 2 |
| Average | 10 | 105920 | -1.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 10 hedge funds with bullish positions and the average amount invested in these stocks was $106 million. That figure was $51 million in PEGI’s case. Monro Muffler Brake Inc (NASDAQ:MNRO) is the most popular stock in this table. On the other hand Genesis Energy, L.P. (NYSE:GEL) is the least popular one with only 2 bullish hedge fund positions. Pattern Energy Group Inc (NASDAQ:PEGI) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but 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 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately PEGI wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on PEGI were disappointed as the stock returned 2.2% during the fourth quarter (through the end of November) 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 many of these stocks already outperformed the market so far this year.
Disclosure: None. This article was originally published at Insider Monkey.
