Should You Avoid Parkway Inc (PKY)?

Looking for high-potential stocks? Just follow the big players within the hedge fund industry. Why should you do so? Let’s take a brief look at what statistics have to say about hedge funds’ stock picking abilities to illustrate. The Standard and Poor’s 500 Index returned approximately 7.6% in the 12 months ending November 21, with more than 51% of the stocks in the index failing to beat the benchmark. Therefore, the odds that one will pin down a winner by randomly picking a stock are less than the odds in a fair coin-tossing game. Conversely, best performing hedge funds’ 30 preferred mid-cap stocks generated a return of 18% during the same 12-month period. Coincidence? It might happen to be so, but it is unlikely. Our research covering a 17-year period indicates that hedge funds’ stock picks generate superior risk-adjusted returns. That’s why we believe it is wise to check hedge fund activity before you invest your time or your savings on a stock like Parkway Inc (NYSE:PKY) .

Is Parkway Inc (NYSE:PKY) worth your attention right now? Prominent investors are indeed actually taking a pessimistic view. The number of bullish hedge fund bets fell by 2 recently. PKY was in 11 hedge funds’ portfolios at the end of September. There were 13 hedge funds in our database with PKY 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 Granite Construction Inc. (NYSE:GVA), American Assets Trust, Inc (NYSE:AAT), and Pattern Energy Group Inc (NASDAQ:PEGI) to gather more data points.

We follow over 700 hedge funds and other institutional investors and by analyzing their quarterly 13F filings, we identify stocks that they are collectively bullish on and develop investment strategies based on this data. One strategy that outperformed the market over the last year involves selecting the 100 best-performing funds and identifying the 30 mid-cap stocks that they are collectively most bullish on. Over the past year, this strategy generated returns of 18%, topping the 8% gain registered by S&P 500 ETFs. We launched this strategy 2.5 years ago and it returned more than 39% since then, vs. 22% gain registered by the S&P 500 ETFs.

Keeping this in mind, let’s check out the new action encompassing Parkway Inc (NYSE:PKY).

What does the smart money think about Parkway Inc (NYSE:PKY)?

At Q3’s end, a total of 11 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -15% from the previous quarter. On the other hand, there were a total of 9 hedge funds with a bullish position in PKY at the beginning of this year. With hedgies’ sentiment swirling, there exists a few noteworthy hedge fund managers who were boosting their holdings meaningfully (or already accumulated large positions).

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Magnetar Capital, led by Alec Litowitz and Ross Laser, holds the most valuable position in Parkway Properties Inc (NYSE:PKY). Magnetar Capital has a $31.8 million position in the stock, comprising 0.5% of its 13F portfolio. The second most bullish fund manager is Renaissance Technologies, one of the largest hedge funds in the world,, holding a $8.5 million position; less than 0.1% of its 13F portfolio is allocated to the stock. Some other peers that are bullish consist of John Overdeck and David Siegel’s Two Sigma Advisors, Gavin Saitowitz and Cisco J. del Valle’s Springbok Capital and John D. Gillespie’s Prospector Partners. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.

Judging by the fact that Parkway Properties Inc (NYSE:PKY) has weathered declining sentiment from the aggregate hedge fund industry, we can see that there exists a select few money managers who sold off their full holdings in the third quarter. It’s worth mentioning that John Orrico’s Water Island Capital dropped the biggest stake of the “upper crust” of funds followed by Insider Monkey, totaling close to $8.7 million in stock, and Anand Parekh’s Alyeska Investment Group was right behind this move, as the fund said goodbye to about $3.4 million worth of shares.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Parkway Properties Inc (NYSE:PKY) but similarly valued. We will take a look at Granite Construction Inc. (NYSE:GVA), American Assets Trust, Inc (NYSE:AAT), Pattern Energy Group Inc (NASDAQ:PEGI), and Rice Midstream Partners LP(NYSE:RMP). This group of stocks’ market caps match PKY’s market cap.

As you can see these stocks had an average of 10 hedge funds with bullish positions and the average amount invested in these stocks was $133 million. That figure was $68 million in PKY’s case. Pattern Energy Group Inc (NASDAQ:PEGI) is the most popular stock in this table. On the other hand American Assets Trust, Inc (NYSE:AAT) is the least popular one with only 6 bullish hedge fund positions. Parkway Properties Inc (NYSE:PKY) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. In this regard PEGI might be a better candidate to consider taking a long position in.