Provident Financial Services, Inc. (PFS): Smart Money Buying Ahead of Interest Rate Hike

It seems that the masses and most of the financial media hate hedge funds and what they do, but why is this hatred of hedge funds so prominent? At the end of the day, these asset management firms do not gamble the hard-earned money of the people who are on the edge of poverty. Truth be told, most hedge fund managers and other smaller players within this industry are very smart and skilled investors. Of course, they may also make wrong bets in some instances, but no one knows what the future holds and how market participants will react to the bountiful news that floods in each day. The S&P 500 Index gained 5.2% in the 12 month-period that ended October 30, while less than 49% of its stocks beat the benchmark. In contrast, the 30 most popular S&P 500 stocks among the hedge fund investors tracked by the Insider Monkey team returned 9.5% over the same period, which provides evidence that these money managers do have great stock picking abilities. Even more to that, 63% of these stocks managed to beat the S&P 500 Index. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like Provident Financial Services, Inc. (NYSE:PFS).

Provident Financial Services, Inc. (NYSE:PFS) has seen an increase in hedge fund interest lately, with a rise into the double-digits as far as number of smart money investors in our database holding the stock. At the end of this article we will also compare Provident Financial Services, Inc. to other stocks including First Interstate Bancsystem Inc (NASDAQ:FIBK), Columbia Pipeline Partners LP (NYSE:CPPL), and MasTec, Inc. (NYSE:MTZ) to get a better sense of its popularity.

To most shareholders, hedge funds are viewed as unimportant, old investment tools of years past. While there are more than an 8,000 funds trading today, our experts choose to focus on the top tier of this club, about 700 funds. These hedge fund managers have their hands on the lion’s share of the hedge fund industry’s total capital, and by monitoring their unrivaled stock picks, Insider Monkey has determined several investment strategies that have historically surpassed the S&P 500 index. Insider Monkey’s small-cap hedge fund strategy outpaced the S&P 500 index by 12 percentage points annually for a decade in their back tests.

Now, let’s analyze the fresh action surrounding Provident Financial Services, Inc. (NYSE:PFS).

Hedge fund activity in Provident Financial Services, Inc. (NYSE:PFS)

At Q3’s end, a total of 10 of the hedge funds tracked by Insider Monkey held long positions in this stock, a 67% boost from the previous quarter. With hedgies’ positions undergoing their usual ebb and flow, there exists a select group of noteworthy hedge fund managers who were boosting their holdings considerably (or already accumulated large positions).

According to Insider Monkey’s hedge fund database, Renaissance Technologies holds the most valuable position in Provident Financial Services, Inc. (NYSE:PFS). Renaissance Technologies has an $11.3 million position in the stock, comprising less than 0.1% of its 13F portfolio. On Renaissance Technologies’ heels is Millennium Management, managed by Israel Englander, which holds a $3.3 million position; less than 0.1% of its 13F portfolio is allocated to the stock. Remaining hedge funds and institutional investors that hold long positions consist of Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, Ken Gray and Steve Walsh’s Bryn Mawr Capital, and Chao Ku’s Nine Chapters Capital Management.

With general bullishness amongst the heavyweights, key money managers were leading the bulls’ herd. Nine Chapters Capital Management established the largest position in Provident Financial Services, Inc. (NYSE:PFS). Nine Chapters Capital Management had $0.9 million invested in the company at the end of the quarter. Glenn Russell Dubin’s Highbridge Capital Management also initiated a $0.6 million position during the quarter. The other funds with brand new Provident Financial Services, Inc. positions are Peter Muller’s PDT Partners and D E Shaw.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Provident Financial Services, Inc. (NYSE:PFS) but similarly valued. These stocks are First Interstate Bancsystem Inc (NASDAQ:FIBK), Columbia Pipeline Partners LP (NYSE:CPPL), MasTec, Inc. (NYSE:MTZ), and Viavi Solutions Inc (NASDAQ:VIAV). All of these stocks’ market caps are closest to Provident Financial Services, Inc.’s market cap.

As you can see these stocks had an average of 14 hedge funds with bullish positions and the average amount invested in these stocks was $129 million. That figure was $23 million in Provident Financial Services, Inc.’s case. MasTec, Inc. (NYSE:MTZ) is the most popular stock in this table. On the other hand Columbia Pipeline Partners LP (NYSE:CPPL) is the least popular one with only 4 bullish hedge fund positions. Provident Financial Services, Inc. (NYSE:PFS) is not the least popular stock in this group but hedge fund interest is still below average, though it is rising. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard MasTec, Inc. might be a better candidate to consider a long position.