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Paramount Group Inc (PGRE): Hedge Funds Are Cashing Out

We at Insider Monkey have gone over 821 13F filings that hedge funds and prominent investors are required to file by the SEC The 13F filings show the funds’ and investors’ portfolio positions as of March 31st, near the height of the coronavirus market crash. In this article, we look at what those funds think of Paramount Group Inc (NYSE:PGRE) based on that data.

Paramount Group Inc (NYSE:PGRE) has experienced a decrease in enthusiasm from smart money lately. PGRE was in 19 hedge funds’ portfolios at the end of the first quarter of 2020. There were 20 hedge funds in our database with PGRE holdings at the end of the previous quarter. Our calculations also showed that PGRE isn’t among the 30 most popular stocks among hedge funds (click for Q1 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.

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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 58 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Jeffrey Altman Owl Creek

Jeffrey Altman of Owl Creek Asset Management

We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind let’s check out the latest hedge fund action regarding Paramount Group Inc (NYSE:PGRE).

Hedge fund activity in Paramount Group Inc (NYSE:PGRE)

Heading into the second quarter of 2020, a total of 19 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -5% from the fourth quarter of 2019. By comparison, 16 hedge funds held shares or bullish call options in PGRE a year ago. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in Paramount Group Inc (NYSE:PGRE) was held by Owl Creek Asset Management, which reported holding $44.4 million worth of stock at the end of September. It was followed by Long Pond Capital with a $42.5 million position. Other investors bullish on the company included Renaissance Technologies, Two Sigma Advisors, and Citadel Investment Group. In terms of the portfolio weights assigned to each position Owl Creek Asset Management allocated the biggest weight to Paramount Group Inc (NYSE:PGRE), around 3.53% of its 13F portfolio. Long Pond Capital is also relatively very bullish on the stock, setting aside 2.18 percent of its 13F equity portfolio to PGRE.

Because Paramount Group Inc (NYSE:PGRE) has witnessed a decline in interest from hedge fund managers, logic holds that there lies a certain “tier” of funds that decided to sell off their positions entirely heading into Q4. Interestingly, Noam Gottesman’s GLG Partners cut the largest stake of the 750 funds followed by Insider Monkey, comprising close to $20.6 million in stock, and Israel Englander’s Millennium Management was right behind this move, as the fund cut about $19 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest fell by 1 funds heading into Q4.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Paramount Group Inc (NYSE:PGRE) but similarly valued. We will take a look at The Ensign Group, Inc. (NASDAQ:ENSG), Apellis Pharmaceuticals, Inc. (NASDAQ:APLS), Cracker Barrel Old Country Store, Inc. (NASDAQ:CBRL), and Home Bancshares, Inc. (Conway, AR) (NASDAQ:HOMB). All of these stocks’ market caps match PGRE’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
ENSG 18 88885 3
APLS 30 455911 -1
CBRL 23 101131 -1
HOMB 20 15614 8
Average 22.75 165385 2.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 22.75 hedge funds with bullish positions and the average amount invested in these stocks was $165 million. That figure was $155 million in PGRE’s case. Apellis Pharmaceuticals, Inc. (NASDAQ:APLS) is the most popular stock in this table. On the other hand The Ensign Group, Inc. (NASDAQ:ENSG) is the least popular one with only 18 bullish hedge fund positions. Paramount Group Inc (NYSE:PGRE) 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 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 13.4% in 2020 through June 22nd and surpassed the market by 15.9 percentage points. Unfortunately PGRE wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); PGRE investors were disappointed as the stock returned -8.5% during the second quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.

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Disclosure: None. This article was originally published at Insider Monkey.