The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 817 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of September 30th, about a month before the elections. In this article we look at what those investors think of PICO Holdings Inc (NASDAQ:PICO).
Is PICO a good stock to buy now? Investors who are in the know were becoming less hopeful. The number of bullish hedge fund positions dropped by 3 recently. PICO Holdings Inc (NASDAQ:PICO) was in 10 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistics is 13. Our calculations also showed that PICO 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.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
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. With all of this in mind we’re going to analyze the new hedge fund action encompassing PICO Holdings Inc (NASDAQ:PICO).
Do Hedge Funds Think PICO Is A Good Stock To Buy Now?
At the end of the third quarter, a total of 10 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -23% from the second quarter of 2020. On the other hand, there were a total of 12 hedge funds with a bullish position in PICO a year ago. With hedge funds’ sentiment swirling, there exists an “upper tier” of key hedge fund managers who were boosting their holdings significantly (or already accumulated large positions).
The largest stake in PICO Holdings Inc (NASDAQ:PICO) was held by Bandera Partners, which reported holding $9.4 million worth of stock at the end of September. It was followed by Royce & Associates with a $6.6 million position. Other investors bullish on the company included Renaissance Technologies, Arrowstreet Capital, and D E Shaw. In terms of the portfolio weights assigned to each position Bandera Partners allocated the biggest weight to PICO Holdings Inc (NASDAQ:PICO), around 6.14% of its 13F portfolio. Royce & Associates is also relatively very bullish on the stock, dishing out 0.07 percent of its 13F equity portfolio to PICO.
Due to the fact that PICO Holdings Inc (NASDAQ:PICO) has witnessed declining sentiment from hedge fund managers, it’s safe to say that there exists a select few hedge funds that decided to sell off their full holdings last quarter. It’s worth mentioning that Israel Englander’s Millennium Management said goodbye to the largest investment of all the hedgies watched by Insider Monkey, valued at about $0.2 million in stock, and Greg Eisner’s Engineers Gate Manager was right behind this move, as the fund said goodbye to about $0.1 million worth. These moves are interesting, as aggregate hedge fund interest fell by 3 funds last quarter.
Let’s also examine hedge fund activity in other stocks similar to PICO Holdings Inc (NASDAQ:PICO). We will take a look at Stellus Capital Investment Corporation (NYSE:SCM), Telenav Inc (NASDAQ:TNAV), New Age Beverages Corporation (NASDAQ:NBEV), Ampio Pharmaceuticals, Inc. (NASDAQ:AMPE), Kindred Biosciences Inc (NASDAQ:KIN), GasLog Partners LP (NYSE:GLOP), and Earthstone Energy, Inc. (NYSE:ESTE). This group of stocks’ market valuations are closest to PICO’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 6 hedge funds with bullish positions and the average amount invested in these stocks was $13 million. That figure was $22 million in PICO’s case. Telenav Inc (NASDAQ:TNAV) is the most popular stock in this table. On the other hand Ampio Pharmaceuticals, Inc. (NASDAQ:AMPE) is the least popular one with only 2 bullish hedge fund positions. PICO Holdings Inc (NASDAQ:PICO) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for PICO is 69.5. 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 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 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 beat the market again by 16.2 percentage points. Unfortunately PICO wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on PICO were disappointed as the stock returned 0% 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 many of these stocks already outperformed the market so far this year.
Follow Vidler Water Resources Inc. (NASDAQ:VWTR)
Follow Vidler Water Resources Inc. (NASDAQ:VWTR)
Disclosure: None. This article was originally published at Insider Monkey.