Is Quanta Services Inc (PWR) A Good Stock To Buy?

“The global economic environment is very favorable for investors. Economies are generally strong, but not too strong. Employment levels are among the strongest for many decades. Interest rates are paused at very low levels, and the risk of significant increases in the medium term seems low. Financing for transactions is freely available to good borrowers, but not in major excess. Covenants are lighter than they were five years ago, but the extreme excesses seen in the past do not seem prevalent yet today. Despite this apparent ‘goldilocks’ market environment, we continue to worry about a world where politics are polarized almost everywhere, interest rates are low globally, and equity valuations are at their peak,” are the words of Brookfield Asset Management. Brookfield was right about politics as stocks experienced their second worst May since the 1960s due to escalation of trade disputes. We pay attention to what hedge funds are doing in a particular stock before considering a potential investment because it works for us. So let’s take a glance at the smart money sentiment towards Quanta Services Inc (NYSE:PWR) and see how it was affected.

Quanta Services Inc (NYSE:PWR) investors should pay attention to a decrease in enthusiasm from smart money recently. Our calculations also showed that pwr 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.

William Harnisch

We’re going to view the fresh hedge fund action regarding Quanta Services Inc (NYSE:PWR).

Hedge fund activity in Quanta Services Inc (NYSE:PWR)

Heading into the second quarter of 2019, a total of 24 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -11% from the previous quarter. On the other hand, there were a total of 33 hedge funds with a bullish position in PWR a year ago. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

No of Hedge Funds with PWR Positions

Among these funds, Peconic Partners LLC held the most valuable stake in Quanta Services Inc (NYSE:PWR), which was worth $435.7 million at the end of the first quarter. On the second spot was Greenhaven Associates which amassed $105.2 million worth of shares. Moreover, D E Shaw, Millennium Management, and AQR Capital Management were also bullish on Quanta Services Inc (NYSE:PWR), allocating a large percentage of their portfolios to this stock.

Judging by the fact that Quanta Services Inc (NYSE:PWR) has faced a decline in interest from the smart money, it’s safe to say that there lies a certain “tier” of hedgies that elected to cut their full holdings in the third quarter. It’s worth mentioning that Doug Gordon, Jon Hilsabeck and Don Jabro’s Shellback Capital dumped the largest stake of all the hedgies monitored by Insider Monkey, valued at about $3.6 million in stock. Ray Dalio’s fund, Bridgewater Associates, also cut its stock, about $3.4 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest dropped by 3 funds in the third quarter.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Quanta Services Inc (NYSE:PWR) but similarly valued. These stocks are Vipshop Holdings Limited (NYSE:VIPS), Array Biopharma Inc (NASDAQ:ARRY), Transocean Ltd (NYSE:RIG), and Hudson Pacific Properties Inc (NYSE:HPP). This group of stocks’ market values are similar to PWR’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
VIPS 17 125275 -5
ARRY 32 1106924 1
RIG 37 756782 4
HPP 12 362610 0
Average 24.5 587898 0

View table here if you experience formatting issues.

As you can see these stocks had an average of 24.5 hedge funds with bullish positions and the average amount invested in these stocks was $588 million. That figure was $832 million in PWR’s case. Transocean Ltd (NYSE:RIG) is the most popular stock in this table. On the other hand Hudson Pacific Properties Inc (NYSE:HPP) is the least popular one with only 12 bullish hedge fund positions. Quanta Services Inc (NYSE:PWR) is not the least popular stock in this group but hedge fund interest is still below average. 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 1.9% in Q2 through May 30th and outperformed the S&P 500 ETF (SPY) by more than 3 percentage points. Unfortunately PWR wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); PWR investors were disappointed as the stock returned -6.2% during the same time 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.