Although the masses and most of the financial media blame hedge funds for their exorbitant fee structure and disappointing performance, these investors have proved to have great stock picking abilities over the years (that’s why their assets under management continue to swell). We believe hedge fund sentiment should serve as a crucial tool of an individual investor’s stock selection process, as it may offer great insights of how the brightest minds of the finance industry feel about specific stocks. After all, these people have access to smartest analysts and expensive data/information sources that individual investors can’t match. So should one consider investing in Pinnacle West Capital Corporation (NYSE:PNW)? The smart money sentiment can provide an answer to this question.
Pinnacle West Capital Corporation (NYSE:PNW) has experienced a decrease in enthusiasm from smart money lately. Our calculations also showed that PNW isn’t among the 30 most popular stocks among hedge funds (see the video below).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
In the 21st century investor’s toolkit there are a lot of indicators market participants can use to evaluate stocks. A pair of the less known indicators are hedge fund and insider trading signals. Our researchers have shown that, historically, those who follow the best picks of the best investment managers can outpace the S&P 500 by a superb amount (see the details here).
Unlike this former hedge fund manager who is convinced Dow will soar past 40000, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. We’re going to go over the recent hedge fund action encompassing Pinnacle West Capital Corporation (NYSE:PNW).
How are hedge funds trading Pinnacle West Capital Corporation (NYSE:PNW)?
At the end of the second quarter, a total of 23 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -4% from the first quarter of 2019. Below, you can check out the change in hedge fund sentiment towards PNW over the last 16 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, AQR Capital Management held the most valuable stake in Pinnacle West Capital Corporation (NYSE:PNW), which was worth $272.9 million at the end of the second quarter. On the second spot was Renaissance Technologies which amassed $263.9 million worth of shares. Moreover, GLG Partners, ExodusPoint Capital, and Citadel Investment Group were also bullish on Pinnacle West Capital Corporation (NYSE:PNW), allocating a large percentage of their portfolios to this stock.
Since Pinnacle West Capital Corporation (NYSE:PNW) has faced declining sentiment from the smart money, we can see that there is a sect of funds that decided to sell off their entire stakes last quarter. It’s worth mentioning that Peter Muller’s PDT Partners cut the largest investment of all the hedgies monitored by Insider Monkey, worth an estimated $9.8 million in stock, and Peter J. Hark’s Shelter Harbor Advisors was right behind this move, as the fund said goodbye to about $9.6 million worth. These transactions are interesting, as aggregate hedge fund interest dropped by 1 funds last quarter.
Let’s check out hedge fund activity in other stocks similar to Pinnacle West Capital Corporation (NYSE:PNW). These stocks are Wheaton Precious Metals Corp. (NYSE:WPM), Roku, Inc. (NASDAQ:ROKU), Jack Henry & Associates, Inc. (NASDAQ:JKHY), and PTC Inc (NASDAQ:PTC). This group of stocks’ market caps are similar to PNW’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| WPM | 19 | 291052 | 0 |
| ROKU | 33 | 550484 | 0 |
| JKHY | 18 | 132769 | 1 |
| PTC | 23 | 1197320 | -2 |
| Average | 23.25 | 542906 | -0.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 23.25 hedge funds with bullish positions and the average amount invested in these stocks was $543 million. That figure was $684 million in PNW’s case. Roku, Inc. (NASDAQ:ROKU) is the most popular stock in this table. On the other hand Jack Henry & Associates, Inc. (NASDAQ:JKHY) is the least popular one with only 18 bullish hedge fund positions. Pinnacle West Capital Corporation (NYSE:PNW) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. A small number of hedge funds were also right about betting on PNW, though not to the same extent, as the stock returned 4% during the third quarter and outperformed the market.
Disclosure: None. This article was originally published at Insider Monkey.
