Penske Automotive Group, Inc. (PAG): Hedge Funds Are Nibbling

Penske Automotive Group, Inc. (PAG): Hedge Funds Are Nibbling

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At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (see why hell is coming). We reversed our stance on March 25th after seeing unprecedented fiscal and monetary stimulus unleashed by the Fed and the Congress. This is the perfect market for stock pickers, now that the stocks are fully valued again. In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards Penske Automotive Group, Inc. (NYSE:PAG) at the end of the second quarter and determine whether the smart money was really smart about this stock.

Penske Automotive Group, Inc. (NYSE:PAG) investors should pay attention to an increase in activity from the world’s largest hedge funds lately. Penske Automotive Group, Inc. (NYSE:PAG) was in 21 hedge funds’ portfolios at the end of the second quarter of 2020. The all time high for this statistics is 29. Our calculations also showed that PAG isn’t 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.

In today’s marketplace there are a large number of tools shareholders can use to assess publicly traded companies. A pair of the most under-the-radar tools are hedge fund and insider trading sentiment. Our experts have shown that, historically, those who follow the best picks of the elite fund managers can outperform the market by a solid amount (see the details here).

DUQUESNE CAPITAL

Stanley Druckenmiller of Duquesne Capital

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost precious metals prices. So, we are checking out this junior gold mining stock. We are also checking out this lithium company which could benefit from the electric car adoption. 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. With all of this in mind let’s go over the key hedge fund action regarding Penske Automotive Group, Inc. (NYSE:PAG).

Hedge fund activity in Penske Automotive Group, Inc. (NYSE:PAG)

At Q2’s end, a total of 21 of the hedge funds tracked by Insider Monkey were long this stock, a change of 11% from the first quarter of 2020. Below, you can check out the change in hedge fund sentiment towards PAG over the last 20 quarters. With hedge funds’ sentiment swirling, there exists a few noteworthy hedge fund managers who were increasing their stakes considerably (or already accumulated large positions).

According to Insider Monkey’s hedge fund database, AQR Capital Management, managed by Cliff Asness, holds the biggest position in Penske Automotive Group, Inc. (NYSE:PAG). AQR Capital Management has a $21.7 million position in the stock, comprising less than 0.1%% of its 13F portfolio. The second most bullish fund manager is GAMCO Investors, led by Mario Gabelli, holding a $19.6 million position; the fund has 0.2% of its 13F portfolio invested in the stock. Some other professional money managers with similar optimism include Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, Murray Stahl’s Horizon Asset Management and Louis Bacon’s Moore Global Investments. In terms of the portfolio weights assigned to each position Horizon Asset Management allocated the biggest weight to Penske Automotive Group, Inc. (NYSE:PAG), around 0.35% of its 13F portfolio. GAMCO Investors is also relatively very bullish on the stock, earmarking 0.22 percent of its 13F equity portfolio to PAG.

As one would reasonably expect, some big names were leading the bulls’ herd. Renaissance Technologies, initiated the biggest position in Penske Automotive Group, Inc. (NYSE:PAG). Renaissance Technologies had $2 million invested in the company at the end of the quarter. Paul Tudor Jones’s Tudor Investment Corp also initiated a $1.8 million position during the quarter. The following funds were also among the new PAG investors: Stanley Druckenmiller’s Duquesne Capital, Michael Gelband’s ExodusPoint Capital, and Paul Marshall and Ian Wace’s Marshall Wace LLP.

Let’s go over hedge fund activity in other stocks similar to Penske Automotive Group, Inc. (NYSE:PAG). We will take a look at Aerojet Rocketdyne Holdings Inc (NYSE:AJRD), First Horizon National Corporation (NYSE:FHN), TFI International Inc. (NYSE:TFII), Vicor Corp (NASDAQ:VICR), New Residential Investment Corp (NYSE:NRZ), Companhia Paranaense de Energia – COPEL (NYSE:ELP), and Vivint Smart Home, Inc. (NYSE:VVNT). This group of stocks’ market valuations are similar to PAG’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
AJRD 25 405251 2
FHN 35 384471 4
TFII 10 67009 -2
VICR 19 81691 5
NRZ 22 121379 -1
ELP 12 39175 5
VVNT 5 5836 -4
Average 18.3 157830 1.3

View table here if you experience formatting issues.

As you can see these stocks had an average of 18.3 hedge funds with bullish positions and the average amount invested in these stocks was $158 million. That figure was $83 million in PAG’s case. First Horizon National Corporation (NYSE:FHN) is the most popular stock in this table. On the other hand Vivint Smart Home, Inc. (NYSE:VVNT) is the least popular one with only 5 bullish hedge fund positions. Penske Automotive Group, Inc. (NYSE:PAG) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for PAG is 55.4. 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 gained 24.8% in 2020 through the end of third quarter and still beat the market by 19.3 percentage points. Hedge funds were also right about betting on PAG as the stock returned 23.1% during Q3 and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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



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