Do Hedge Funds Love Patterson Companies, Inc. (PDCO)?

In this article we will analyze whether Patterson Companies, Inc. (NASDAQ:PDCO) is a good investment right now by following the lead of some of the best investors in the world and piggybacking their ideas. There’s no better way to get these firms’ immense resources and analytical capabilities working for us than to follow their lead into their best ideas. While not all of these picks will be winners, our research shows that these picks historically outperformed the market by double digits annually.

Is Patterson Companies, Inc. (NASDAQ:PDCO) an outstanding stock to buy now? Investors who are in the know were getting more optimistic. The number of long hedge fund positions inched up by 3 in recent months. Patterson Companies, Inc. (NASDAQ:PDCO) was in 23 hedge funds’ portfolios at the end of the second quarter of 2021. The all time high for this statistic is 29. Our calculations also showed that PDCO isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings). There were 20 hedge funds in our database with PDCO holdings at the end of March.

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Hedge funds have more than $3.5 trillion in assets under management, so you can’t expect their entire portfolios to beat the market by large margins. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 79 percentage points since March 2017 (see the details here). So you can still find a lot of gems by following hedge funds’ moves today.

Justin John Ferayorni of Tamarack Capital Management

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. 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 we’re going to view the latest hedge fund action encompassing Patterson Companies, Inc. (NASDAQ:PDCO).

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

At second quarter’s end, a total of 23 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 15% from the previous quarter. The graph below displays the number of hedge funds with bullish position in PDCO over the last 24 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, GAMCO Investors held the most valuable stake in Patterson Companies, Inc. (NASDAQ:PDCO), which was worth $31.6 million at the end of the second quarter. On the second spot was Millennium Management which amassed $24.9 million worth of shares. Balyasny Asset Management, Lodge Hill Capital, and Tamarack 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 Lodge Hill Capital allocated the biggest weight to Patterson Companies, Inc. (NASDAQ:PDCO), around 5.38% of its 13F portfolio. Tamarack Capital Management is also relatively very bullish on the stock, designating 4.09 percent of its 13F equity portfolio to PDCO.

As one would reasonably expect, some big names were breaking ground themselves. Balyasny Asset Management, managed by Dmitry Balyasny, initiated the biggest position in Patterson Companies, Inc. (NASDAQ:PDCO). Balyasny Asset Management had $21 million invested in the company at the end of the quarter. Ray Dalio’s Bridgewater Associates also initiated a $2.2 million position during the quarter. The other funds with brand new PDCO positions are Mika Toikka’s AlphaCrest Capital Management, Renaissance Technologies, and Gavin Saitowitz and Cisco J. del Valle’s Prelude Capital (previously Springbok Capital).

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Patterson Companies, Inc. (NASDAQ:PDCO) but similarly valued. We will take a look at PJT Partners Inc (NYSE:PJT), Desktop Metal, Inc. (NYSE:DM), Trinity Industries, Inc. (NYSE:TRN), Energizer Holdings, Inc. (NYSE:ENR), American States Water Co (NYSE:AWR), Sprouts Farmers Market Inc (NASDAQ:SFM), and Verint Systems Inc. (NASDAQ:VRNT). This group of stocks’ market values are closest to PDCO’s market value.

View table here if you experience formatting issues.

As you can see these stocks had an average of 21.7 hedge funds with bullish positions and the average amount invested in these stocks was $289 million. That figure was $159 million in PDCO’s case. Verint Systems Inc. (NASDAQ:VRNT) is the most popular stock in this table. On the other hand American States Water Co (NYSE:AWR) is the least popular one with only 14 bullish hedge fund positions. Patterson Companies, Inc. (NASDAQ:PDCO) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for PDCO is 59.9. 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 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 24% in 2021 through October 22nd and still beat the market by 1.6 percentage points. Hedge funds were also right about betting on PDCO as the stock returned 6.6% since the end of Q2 (through 10/22) 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.