With the third-quarter round of 13F filings behind us it is time to take a look at the stocks in which some of the best money managers in the world preferred to invest or sell heading into the fourth quarter. One of these stocks was Pacific Ethanol Inc (NASDAQ:PEIX).
Is PEIX a good stock to buy now? The best stock pickers were taking an optimistic view. The number of bullish hedge fund bets improved by 8 in recent months. Pacific Ethanol Inc (NASDAQ:PEIX) was in 11 hedge funds’ portfolios at the end of September. The all time high for this statistics is 13. Our calculations also showed that PEIX 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). There were 3 hedge funds in our database with PEIX holdings at the end of June.
Video: Watch our video about the top 5 most popular hedge fund stocks.
According to most market participants, hedge funds are perceived as underperforming, outdated financial tools of yesteryear. While there are over 8000 funds in operation today, Our experts look at the leaders of this club, around 850 funds. These money managers handle bulk of the smart money’s total asset base, and by tracking their unrivaled stock picks, Insider Monkey has unearthed several investment strategies that have historically exceeded the market. Insider Monkey’s flagship short hedge fund strategy surpassed the S&P 500 short ETFs by around 20 percentage points annually since its inception in March 2017. Our portfolio of short stocks lost 13% since February 2017 (through November 17th) even though the market was up 65% during the same period. We just shared a list of 6 short targets in our latest quarterly update .
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 15 best blue chip stocks to pick the best large-cap stocks to buy. 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. Keeping this in mind we’re going to review the fresh hedge fund action surrounding Pacific Ethanol Inc (NASDAQ:PEIX).
Do Hedge Funds Think PEIX Is A Good Stock To Buy Now?
At Q3’s end, a total of 11 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 267% from the second quarter of 2020. By comparison, 3 hedge funds held shares or bullish call options in PEIX 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.
Among these funds, Renaissance Technologies held the most valuable stake in Pacific Ethanol Inc (NASDAQ:PEIX), which was worth $35.4 million at the end of the third quarter. On the second spot was Encompass Capital Advisors which amassed $13.5 million worth of shares. SG Capital Management, Portolan Capital Management, and Arrowstreet Capital 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 SG Capital Management allocated the biggest weight to Pacific Ethanol Inc (NASDAQ:PEIX), around 3.57% of its 13F portfolio. Encompass Capital Advisors is also relatively very bullish on the stock, earmarking 1.2 percent of its 13F equity portfolio to PEIX.
As industrywide interest jumped, specific money managers were leading the bulls’ herd. Encompass Capital Advisors, managed by Todd J. Kantor, assembled the most valuable position in Pacific Ethanol Inc (NASDAQ:PEIX). Encompass Capital Advisors had $13.5 million invested in the company at the end of the quarter. Ken Grossman and Glen Schneider’s SG Capital Management also initiated a $12.4 million position during the quarter. The other funds with new positions in the stock are George McCabe’s Portolan Capital Management, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, and Greg Eisner’s Engineers Gate Manager.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Pacific Ethanol Inc (NASDAQ:PEIX) but similarly valued. These stocks are WisdomTree Investments, Inc. (NASDAQ:WETF), Renalytix AI plc (NASDAQ:RNLX), Trevena Inc (NASDAQ:TRVN), Collectors Universe, Inc. (NASDAQ:CLCT), AngioDynamics, Inc. (NASDAQ:ANGO), Energy Recovery, Inc. (NASDAQ:ERII), and Watford Holdings Ltd. (NASDAQ:WTRE). This group of stocks’ market values match PEIX’s market value.
|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 11.1 hedge funds with bullish positions and the average amount invested in these stocks was $32 million. That figure was $81 million in PEIX’s case. WisdomTree Investments, Inc. (NASDAQ:WETF) is the most popular stock in this table. On the other hand Renalytix AI plc (NASDAQ:RNLX) is the least popular one with only 4 bullish hedge fund positions. Pacific Ethanol Inc (NASDAQ:PEIX) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for PEIX is 54.8. 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. 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 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 32.9% in 2020 through December 8th and surpassed the market again by 16.2 percentage points. Unfortunately PEIX wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); PEIX investors were disappointed as the stock returned -12.6% since the end of September (through 12/8) 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 most of these stocks already outperformed the market in 2020.
Disclosure: None. This article was originally published at Insider Monkey.