Were Hedge Funds Right About Paramount Group Inc (PGRE)?

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We have processed the filings of the more than 866 world-class investment firms that we track and now have access to the collective wisdom contained in these filings, which are based on their March 31st holdings, data that is available nowhere else. Should you consider Paramount Group Inc (NYSE:PGRE) for your portfolio? We’ll look to this invaluable collective wisdom for the answer.

Paramount Group Inc (NYSE:PGRE) investors should be aware of a decrease in support from the world’s most elite money managers recently. Paramount Group Inc (NYSE:PGRE) was in 17 hedge funds’ portfolios at the end of the first quarter of 2021. The all time high for this statistic is 22. There were 18 hedge funds in our database with PGRE positions at the end of the fourth quarter. Our calculations also showed that PGRE isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).

So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 115 percentage points since March 2017 (see the details here). We have been able to outperform the passive index funds by tracking the moves of corporate insiders and hedge funds, and we believe small investors can benefit a lot from reading hedge fund investor letters and 13F filings.

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, pet market is growing at a 7% annual rate and is expected to reach $110 billion in 2021. So, we are checking out the 5 best stocks for animal lovers. We go through lists like the 15 best Jim Cramer stocks to identify the next Tesla that will deliver outsized returns. 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 homepage. With all of this in mind let’s review the new hedge fund action surrounding Paramount Group Inc (NYSE:PGRE).

Do Hedge Funds Think PGRE Is A Good Stock To Buy Now?

Heading into the second quarter of 2021, a total of 17 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -6% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards PGRE over the last 23 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in Paramount Group Inc (NYSE:PGRE) was held by Arrowstreet Capital, which reported holding $31.9 million worth of stock at the end of December. It was followed by Millennium Management with a $24.4 million position. Other investors bullish on the company included Balyasny Asset Management, AQR Capital Management, and Citadel Investment Group. In terms of the portfolio weights assigned to each position Hill Winds Capital allocated the biggest weight to Paramount Group Inc (NYSE:PGRE), around 4.8% of its 13F portfolio. Balyasny Asset Management is also relatively very bullish on the stock, setting aside 0.11 percent of its 13F equity portfolio to PGRE.

Seeing as Paramount Group Inc (NYSE:PGRE) has experienced falling interest from the aggregate hedge fund industry, logic holds that there lies a certain “tier” of fund managers who sold off their full holdings last quarter. At the top of the heap, Steve Cohen’s Point72 Asset Management dumped the biggest position of the 750 funds watched by Insider Monkey, valued at about $1 million in stock, and Michael Gelband’s ExodusPoint Capital was right behind this move, as the fund sold off about $0.2 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest dropped by 1 funds last quarter.

Let’s now take a look at hedge fund activity in other stocks similar to Paramount Group Inc (NYSE:PGRE). These stocks are Azul S.A. (NYSE:AZUL), TowneBank (NASDAQ:TOWN), AMC Networks Inc (NASDAQ:AMCX), Brandywine Realty Trust (NYSE:BDN), Mueller Water Products, Inc. (NYSE:MWA), Glu Mobile Inc. (NASDAQ:GLUU), and ThredUp Inc. (NASDAQ:TDUP). This group of stocks’ market caps match PGRE’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 17.1 hedge funds with bullish positions and the average amount invested in these stocks was $193 million. That figure was $136 million in PGRE’s case. Glu Mobile Inc. (NASDAQ:GLUU) is the most popular stock in this table. On the other hand TowneBank (NASDAQ:TOWN) is the least popular one with only 9 bullish hedge fund positions. Paramount Group Inc (NYSE:PGRE) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for PGRE is 43.2. 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. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 28.5% in 2021 through July 23rd and surpassed the market again by 10.1 percentage points. Unfortunately PGRE wasn’t nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); PGRE investors were disappointed as the stock returned -1.7% since the end of March (through 7/23) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2021.

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