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Prudential Financial Inc (PRU): Hedge Funds De-risking

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 Prudential Financial Inc (NYSE:PRU) based on that data.

Prudential Financial Inc (NYSE:PRU) shareholders have witnessed a decrease in enthusiasm from smart money in recent months. Our calculations also showed that PRU 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.

To the average investor there are numerous tools market participants have at their disposal to appraise their holdings. Two of the best tools are hedge fund and insider trading indicators. Our researchers have shown that, historically, those who follow the best picks of the top fund managers can trounce the S&P 500 by a healthy margin (see the details here).

GOTHAM ASSET MANAGEMENT

Joel Greenblatt of Gotham Asset Management

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out trades like this one as well as this tiny lithium play. 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. Now let’s take a look at the fresh hedge fund action encompassing Prudential Financial Inc (NYSE:PRU).

What have hedge funds been doing with Prudential Financial Inc (NYSE:PRU)?

At Q1’s end, a total of 28 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -22% from the previous quarter. The graph below displays the number of hedge funds with bullish position in PRU over the last 18 quarters. With the smart money’s capital changing hands, there exists a few noteworthy hedge fund managers who were adding to their stakes significantly (or already accumulated large positions).

More specifically, Arrowstreet Capital was the largest shareholder of Prudential Financial Inc (NYSE:PRU), with a stake worth $207.9 million reported as of the end of September. Trailing Arrowstreet Capital was Two Sigma Advisors, which amassed a stake valued at $38.1 million. Citadel Investment Group, Adage Capital Management, and Millennium Management were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Capital Returns Management allocated the biggest weight to Prudential Financial Inc (NYSE:PRU), around 13.27% of its 13F portfolio. Pittencrieff Partners – Gabalex Capital is also relatively very bullish on the stock, earmarking 3.68 percent of its 13F equity portfolio to PRU.

Because Prudential Financial Inc (NYSE:PRU) has experienced a decline in interest from hedge fund managers, we can see that there was a specific group of money managers who were dropping their positions entirely by the end of the first quarter. At the top of the heap, Jonathan Kolatch’s Redwood Capital Management dumped the largest position of all the hedgies followed by Insider Monkey, totaling about $18.7 million in stock, and Ian Simm’s Impax Asset Management was right behind this move, as the fund dropped about $8.2 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest was cut by 8 funds by the end of the first quarter.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Prudential Financial Inc (NYSE:PRU) but similarly valued. We will take a look at Sea Limited (NYSE:SE), IDEXX Laboratories, Inc. (NASDAQ:IDXX), Yum! Brands, Inc. (NYSE:YUM), and Johnson Controls International plc (NYSE:JCI). This group of stocks’ market valuations are similar to PRU’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
SE 76 3132301 0
IDXX 31 517366 -6
YUM 41 558913 5
JCI 37 1063858 0
Average 46.25 1318110 -0.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 46.25 hedge funds with bullish positions and the average amount invested in these stocks was $1318 million. That figure was $367 million in PRU’s case. Sea Limited (NYSE:SE) is the most popular stock in this table. On the other hand IDEXX Laboratories, Inc. (NASDAQ:IDXX) is the least popular one with only 31 bullish hedge fund positions. Compared to these stocks Prudential Financial Inc (NYSE:PRU) is even less popular than IDXX. 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 8.3% in 2020 through the end of May but managed to beat the market by 13.2 percentage points. A small number of hedge funds were also right about betting on PRU, though not to the same extent, as the stock returned 19.2% during the second quarter (through the end of May) and outperformed the market as well.

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