PS Business Parks Inc (PSB): Are Hedge Funds Right About This Stock?

It is already common knowledge that individual investors do not usually have the necessary resources and abilities to properly research an investment opportunity. As a result, most investors pick their illusory “winners” by making a superficial analysis and research that leads to poor performance on aggregate. The Standard and Poor’s 500 Index returned 5.2% over the 12-month period ending October 30, while more than 51% of the constituents of the index underperformed the benchmark. Hence, a random stock picking process will most likely lead to disappointment. At the same time, the 30 most favored S&P 500 stocks by the hedge funds monitored by Insider Monkey (as of September 2014) generated a return of 9.5% over the same time span, with 63% of these stocks outperforming the benchmark. Of course, hedge funds do make wrong bets on some occasions and these get disproportionately publicized on financial media, but piggybacking their moves can beat the broader market on average. That’s why we are going to go over recent hedge fund activity in PS Business Parks Inc (NYSE:PSB).

PS Business Parks Inc (NYSE:PSB) investors should be aware of a decrease in activity from the world’s largest hedge funds in recent months. PSB was in 8 hedge funds’ portfolios at the end of September. There were 10 hedge funds in our database with PSB holdings at the end of the previous quarter. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity, but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Urban Edge Properties (NYSE:UE), NGL Energy Partners LP (NYSE:NGL), and PDC Energy Inc (NASDAQ:PDCE) to gather more data points.

In the financial world, there are many tools stock traders employ to size up their holdings. A duo of the best tools are hedge fund and insider trading activity. Our experts have shown that, historically, those who follow the best picks of the elite investment managers can outperform the S&P 500 by a solid amount (see the details here).

With all of this in mind, let’s take a look at the recent action surrounding PS Business Parks Inc (NYSE:PSB).

Hedge fund activity in PS Business Parks Inc (NYSE:PSB)

At Q3’s end, a total of 8 of the hedge funds tracked by Insider Monkey were long this stock, a drop of 20% from one quarter earlier. With hedge funds’ capital changing hands, there exists a select group of noteworthy hedge fund managers who were increasing their stakes significantly (or already accumulated large positions).

Of the funds tracked by Insider Monkey, Renaissance Technologies, managed by Jim Simons, holds the largest position in PS Business Parks Inc (NYSE:PSB). The fund has a $21.1 million position in the stock, comprising 0.1% of its 13F portfolio. Coming in second is Ken Griffin of Citadel Investment Group, with a $10.2 million position; the fund has less than 0.1% of its 13F portfolio invested in the stock. Other peers with similar optimism encompass Cliff Asness’s AQR Capital Management, Israel Englander’s Millennium Management and John Overdeck and David Siegel’s Two Sigma Advisors.

Due to the fact that PS Business Parks Inc (NYSE:PSB) has witnessed declining sentiment from the entirety of the hedge funds we track, it’s safe to say that there is a sect of hedgies who sold off their positions entirely by the end of the third quarter. Intriguingly, Dmitry Balyasny’s Balyasny Asset Management sold off the largest stake of the “upper crust” of funds watched by Insider Monkey, totaling an estimated $5.4 million in stock, and D. E. Shaw’s D E Shaw was right behind this move, as the fund sold off about $1.1 million worth of PSB stock. These transactions are intriguing to say the least, as total hedge fund interest dropped by 2 funds by the end of the third quarter.

Let’s check out hedge fund activity in other stocks similar to PS Business Parks Inc (NYSE:PSB). These stocks are Urban Edge Properties (NYSE:UE), NGL Energy Partners LP (NYSE:NGL), PDC Energy Inc (NASDAQ:PDCE), and Groupon Inc (NASDAQ:GRPN). All of these stocks’ market caps match PSB’s market cap.

As you can see these stocks had an average of 18 hedge funds with bullish positions and the average amount invested in these stocks was $130 million. That figure was $43 million in PSB’s case, which is not a very good sign. PDC Energy Inc (NASDAQ:PDCE) is the most popular stock in this table, while NGL Energy Partners LP (NYSE:NGL) is the laggard with only 7 bullish hedge fund positions. PS Business Parks Inc (NYSE:PSB) 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. In this regard PDCE might be a better candidate to consider a long position.