Many investors, including Paul Tudor Jones or Stan Druckenmiller, have been saying before the Q4 market crash that the stock market is overvalued due to a low interest rate environment that leads to companies swapping their equity for debt and focusing mostly on short-term performance such as beating the quarterly earnings estimates. In the first quarter, most investors recovered all of their Q4 losses as sentiment shifted and optimism dominated the US China trade negotiations. Nevertheless, many of the stocks that delivered strong returns in the first quarter still sport strong fundamentals and their gains were more related to the general market sentiment rather than their individual performance and hedge funds kept their bullish stance. In this article we will find out how hedge fund sentiment to PBF Energy Inc (NYSE:PBF) changed recently.
PBF Energy Inc (NYSE:PBF) shareholders have witnessed an increase in hedge fund interest in recent months. PBF was in 22 hedge funds’ portfolios at the end of the first quarter of 2019. There were 18 hedge funds in our database with PBF positions at the end of the previous quarter. Our calculations also showed that pbf isn’t among the 30 most popular stocks among hedge funds.
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 has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (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 30.9% through May 30, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Cliff Asness of AQR Capital Management
Let’s take a gander at the latest hedge fund action surrounding PBF Energy Inc (NYSE:PBF).
What does the smart money think about PBF Energy Inc (NYSE:PBF)?
At Q1’s end, a total of 22 of the hedge funds tracked by Insider Monkey were long this stock, a change of 22% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in PBF over the last 15 quarters. With hedgies’ sentiment swirling, there exists an “upper tier” of notable hedge fund managers who were boosting their holdings significantly (or already accumulated large positions).
The largest stake in PBF Energy Inc (NYSE:PBF) was held by AQR Capital Management, which reported holding $188.1 million worth of stock at the end of March. It was followed by Millennium Management with a $51.5 million position. Other investors bullish on the company included Renaissance Technologies, SIR Capital Management, and D E Shaw.
As industrywide interest jumped, some big names have jumped into PBF Energy Inc (NYSE:PBF) headfirst. SIR Capital Management, managed by Vince Maddi and Shawn Brennan, created the largest position in PBF Energy Inc (NYSE:PBF). SIR Capital Management had $18.1 million invested in the company at the end of the quarter. Dmitry Balyasny’s Balyasny Asset Management also initiated a $9.7 million position during the quarter. The other funds with new positions in the stock are Sara Nainzadeh’s Centenus Global Management, Steve Cohen’s Point72 Asset Management, and Bruce Kovner’s Caxton Associates LP.
Let’s check out hedge fund activity in other stocks similar to PBF Energy Inc (NYSE:PBF). These stocks are Evercore Inc. (NYSE:EVR), Schneider National, Inc. (NYSE:SNDR), GrafTech International Ltd. (NYSE:EAF), and United Bankshares, Inc. (NASDAQ:UBSI). This group of stocks’ market caps match PBF’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| EVR | 25 | 342735 | 1 |
| SNDR | 19 | 121921 | -1 |
| EAF | 24 | 142699 | 1 |
| UBSI | 8 | 28300 | -2 |
| Average | 19 | 158914 | -0.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 19 hedge funds with bullish positions and the average amount invested in these stocks was $159 million. That figure was $343 million in PBF’s case. Evercore Inc. (NYSE:EVR) is the most popular stock in this table. On the other hand United Bankshares, Inc. (NASDAQ:UBSI) is the least popular one with only 8 bullish hedge fund positions. PBF Energy Inc (NYSE:PBF) 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 1.9% in Q2 through May 30th and outperformed the S&P 500 ETF (SPY) by more than 3 percentage points. Unfortunately PBF wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on PBF were disappointed as the stock returned -10% during the same period 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 13 of these stocks already outperformed the market so far in Q2.
Disclosure: None. This article was originally published at Insider Monkey.
