Here is What Hedge Funds Think About Prudential Financial Inc (PRU)

Nina Todic

Wed, Oct 9, 2019, 6:44 PM

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. Insider Monkey finished processing more than 730 13F filings submitted by hedge funds and prominent investors. These filings show these funds' portfolio positions as of June 28th, 2019. What do these smart investors think about Prudential Financial Inc (NYSE:PRU)?

Is Prudential Financial Inc (NYSE:PRU) an attractive investment now? Money managers are in an optimistic mood. The number of long hedge fund bets advanced by 2 lately. Our calculations also showed that PRU isn't among the 30 most popular stocks among hedge funds (see the video below).

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds' large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 25.7% through September 30, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

[caption id="attachment_745225" align="aligncenter" width="473"]

Noam Gottesman, GLG Partners[/caption]

Unlike some fund managers who are betting on Dow reaching 40000 in a year, our long-short investment strategy doesn't rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. Let's take a look at the latest hedge fund action regarding Prudential Financial Inc (NYSE:PRU).

Hedge fund activity in Prudential Financial Inc (NYSE:PRU)

At the end of the second quarter, a total of 33 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 PRU over the last 16 quarters. With hedge funds' positions undergoing their usual ebb and flow, there exists an "upper tier" of notable hedge fund managers who were boosting their holdings considerably (or already accumulated large positions).

Of the funds tracked by Insider Monkey, Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital has the biggest position in Prudential Financial Inc (NYSE:PRU), worth close to $95.8 million, comprising 0.2% of its total 13F portfolio. The second most bullish fund manager is John Overdeck and David Siegel of Two Sigma Advisors, with a $59.6 million position; 0.1% of its 13F portfolio is allocated to the stock. Other peers that hold long positions include Jim Simons's Renaissance Technologies, Phill Gross and Robert Atchinson's Adage Capital Management and Noam Gottesman's GLG Partners.

With a general bullishness amongst the heavyweights, key hedge funds were leading the bulls' herd. Stevens Capital Management, managed by Matthew Tewksbury, initiated the most valuable position in Prudential Financial Inc (NYSE:PRU). Stevens Capital Management had $6.3 million invested in the company at the end of the quarter. Matthew Hulsizer's PEAK6 Capital Management also made a $3.3 million investment in the stock during the quarter. The other funds with brand new PRU positions are Paul Tudor Jones's Tudor Investment Corp, Joel Greenblatt's Gotham Asset Management, and Minhua Zhang's Weld Capital Management.

Let's go over hedge fund activity in other stocks similar to Prudential Financial Inc (NYSE:PRU). We will take a look at Emerson Electric Co. (NYSE:EMR), China Telecom Corporation Limited (NYSE:CHA), ICICI Bank Limited (NYSE:IBN), and Fidelity National Information Services, Inc. (NYSE:FIS). This group of stocks' market values resemble PRU's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position EMR,32,638009,-12 CHA,7,23306,-1 IBN,29,912531,3 FIS,59,4783095,4 Average,31.75,1589235,-1.5 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 31.75 hedge funds with bullish positions and the average amount invested in these stocks was $1589 million. That figure was $512 million in PRU's case. Fidelity National Information Services, Inc. (NYSE:FIS) is the most popular stock in this table. On the other hand China Telecom Corporation Limited (NYSE:CHA) is the least popular one with only 7 bullish hedge fund positions. Prudential Financial Inc (NYSE:PRU) 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. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately PRU wasn't nearly as popular as these 20 stocks and hedge funds that were betting on PRU were disappointed as the stock returned -9.8% during the third quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.