Were Hedge Funds Right About Crowding PG&E Corporation (PCG)?

With this in mind let’s see whether PG&E Corporation (NYSE:PCG) makes for a good investment at the moment. We analyze the sentiment of a select group of the very best investors in the world, who spend immense amounts of time and resources studying companies. They may not always be right (no one is), but data shows that their consensus long positions have historically outperformed the market when we adjust for known risk factors.

PG&E Corporation (NYSE:PCG) investors should pay attention to an increase in hedge fund interest lately. PG&E Corporation (NYSE:PCG) was in 92 hedge funds’ portfolios at the end of June. Prior to the second quarter the all time high for this statistics was 72. This means the bullish number of hedge fund positions in this stock reached a new all time high. Our calculations also showed that PCG ranks 28th among the 30 most popular stocks among hedge funds (click for Q2 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.

According to most market participants, hedge funds are seen as underperforming, outdated financial vehicles of years past. While there are more than 8000 funds in operation at the moment, We look at the bigwigs of this club, about 850 funds. These investment experts manage bulk of the hedge fund industry’s total capital, and by tailing their inimitable equity investments, Insider Monkey has brought to light a number of investment strategies that have historically outstripped the market. Insider Monkey’s flagship short hedge fund strategy surpassed the S&P 500 short ETFs by around 20 percentage points per annum since its inception in March 2017. Our portfolio of short stocks lost 34% since February 2017 (through August 17th) even though the market was up 53% during the same period. We just shared a list of 8 short targets in our latest quarterly update .

Kevin Michael Ulrich Anchorage Advisors

Kevin Michael Ulrich of Anchorage Advisors

At Insider Monkey we scour multiple sources to uncover the next great investment idea. Hedge fund sentiment towards Tesla reached its all time high at the end of 2019 and Tesla shares more than quadrupled this year. We are trying to identify other EV revolution winners, so we are checking out this under-the-radar lithium stock. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website to get excerpts of these letters in your inbox. Keeping this in mind we’re going to view the latest hedge fund action encompassing PG&E Corporation (NYSE:PCG).

Hedge fund activity in PG&E Corporation (NYSE:PCG)

At Q2’s end, a total of 92 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 92% from the first quarter of 2020. By comparison, 67 hedge funds held shares or bullish call options in PCG a year ago. With hedgies’ capital changing hands, there exists a few key hedge fund managers who were adding to their holdings considerably (or already accumulated large positions).

More specifically, Zimmer Partners was the largest shareholder of PG&E Corporation (NYSE:PCG), with a stake worth $635.4 million reported as of the end of September. Trailing Zimmer Partners was Anchorage Advisors, which amassed a stake valued at $389.5 million. Silver Point Capital, Pentwater Capital Management, and Abrams Capital 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 Cyrus Capital Partners allocated the biggest weight to PG&E Corporation (NYSE:PCG), around 59.49% of its 13F portfolio. Silver Point Capital is also relatively very bullish on the stock, designating 49.67 percent of its 13F equity portfolio to PCG.

As industrywide interest jumped, key hedge funds were leading the bulls’ herd. Oaktree Capital Management, managed by Howard Marks, assembled the most valuable position in PG&E Corporation (NYSE:PCG). Oaktree Capital Management had $199.6 million invested in the company at the end of the quarter. Steven Tananbaum’s GoldenTree Asset Management also initiated a $116.4 million position during the quarter. The other funds with brand new PCG positions are George Soros’s Soros Fund Management, Jonathan Barrett and Paul Segal’s Luminus Management, and Zilvinas Mecelis’s Covalis Capital.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as PG&E Corporation (NYSE:PCG) but similarly valued. We will take a look at Slack Technologies Inc (NYSE:WORK), Akamai Technologies, Inc. (NASDAQ:AKAM), Ameren Corporation (NYSE:AEE), Interactive Brokers Group, Inc. (NASDAQ:IBKR), Coca-Cola European Partners plc (NYSE:CCEP), Conagra Brands, Inc. (NYSE:CAG), and iQIYI, Inc. (NASDAQ:IQ). All of these stocks’ market caps resemble PCG’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
WORK 32 287493 1
AKAM 40 548791 0ohip e 5ec56
AEE 19 474360 -2
IBKR 32 695740 10
CCEP 27 464657 5
CAG 35 614220 5
IQ 17 1283437 -11
Average 28.9 624100 1.1

View table here if you experience formatting issues.

As you can see these stocks had an average of 28.9 hedge funds with bullish positions and the average amount invested in these stocks was $624 million. That figure was $4872 million in PCG’s case. Akamai Technologies, Inc. (NASDAQ:AKAM) is the most popular stock in this table. On the other hand iQIYI, Inc. (NASDAQ:IQ) is the least popular one with only 17 bullish hedge fund positions. Compared to these stocks PG&E Corporation (NYSE:PCG) is more popular among hedge funds. Our overall hedge fund sentiment score for PCG is 90. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. 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 returned 29.2% in 2020 through October 16th but still managed to beat the market by 19.7 percentage points. Hedge funds were also right about betting on PCG as the stock returned 18.7% since the end of June (through 10/16) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.

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