The Insider Monkey team has completed processing the quarterly 13F filings for the March quarter submitted by the hedge funds and other money managers included in our extensive database. Most hedge fund investors experienced strong gains on the back of a strong market performance, which certainly propelled them to adjust their equity holdings so as to maintain the desired risk profile. As a result, the relevancy of these public filings and their content is indisputable, as they may reveal numerous high-potential stocks. The following article will discuss the smart money sentiment towards Penumbra Inc (NYSE:PEN).
Is Penumbra Inc (NYSE:PEN) a first-rate investment right now? The smart money was becoming hopeful. The number of bullish hedge fund positions advanced by 7 lately. Penumbra Inc (NYSE:PEN) was in 27 hedge funds’ portfolios at the end of the first quarter of 2021. The all time high for this statistic is 30. Our calculations also showed that PEN isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).
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. 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 115 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
Matthew Hulsizer of PEAK6 Capital
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, economists warn of inflation flare up. So, we are checking out this backdoor gold play that has hit peak gains of 718% in a little over a year. We go through lists like the 10 best battery 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. Now we’re going to take a look at the new hedge fund action regarding Penumbra Inc (NYSE:PEN).
Do Hedge Funds Think PEN Is A Good Stock To Buy Now?
At the end of March, a total of 27 of the hedge funds tracked by Insider Monkey were long this stock, a change of 35% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in PEN over the last 23 quarters. With hedgies’ positions undergoing their usual ebb and flow, there exists a few noteworthy hedge fund managers who were boosting their holdings meaningfully (or already accumulated large positions).
The largest stake in Penumbra Inc (NYSE:PEN) was held by Generation Investment Management, which reported holding $125.2 million worth of stock at the end of December. It was followed by Citadel Investment Group with a $76.3 million position. Other investors bullish on the company included Rock Springs Capital Management, Millennium Management, and Adage Capital Management. In terms of the portfolio weights assigned to each position Engine No. 1 LLC allocated the biggest weight to Penumbra Inc (NYSE:PEN), around 2.62% of its 13F portfolio. Rock Springs Capital Management is also relatively very bullish on the stock, setting aside 0.87 percent of its 13F equity portfolio to PEN.
Now, some big names were leading the bulls’ herd. Adage Capital Management, managed by Phill Gross and Robert Atchinson, initiated the largest position in Penumbra Inc (NYSE:PEN). Adage Capital Management had $37.2 million invested in the company at the end of the quarter. Matthew Hulsizer’s PEAK6 Capital Management also initiated a $13 million position during the quarter. The following funds were also among the new PEN investors: Steve Cohen’s Point72 Asset Management, Michael Rockefeller and KarláKroeker’s Woodline Partners, and Karim Abbadi and Edward McBride’s Centiva Capital.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Penumbra Inc (NYSE:PEN) but similarly valued. We will take a look at American Financial Group (NYSE:AFG), MGM Growth Properties LLC (NYSE:MGP), Aspen Technology, Inc. (NASDAQ:AZPN), Paylocity Holding Corp (NASDAQ:PCTY), Paysafe Limited (NYSE:PSFE), Western Alliance Bancorporation (NYSE:WAL), and McAfee Corp. (NASDAQ:MCFE). This group of stocks’ market valuations are similar to PEN’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| AFG | 21 | 191538 | -3 |
| MGP | 34 | 592102 | 5 |
| AZPN | 32 | 1158081 | 3 |
| PCTY | 22 | 539146 | -4 |
| PSFE | 41 | 1326259 | 41 |
| WAL | 23 | 141015 | 1 |
| MCFE | 17 | 174841 | -3 |
| Average | 27.1 | 588997 | 5.7 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 27.1 hedge funds with bullish positions and the average amount invested in these stocks was $589 million. That figure was $400 million in PEN’s case. Paysafe Limited (NYSE:PSFE) is the most popular stock in this table. On the other hand McAfee Corp. (NASDAQ:MCFE) is the least popular one with only 17 bullish hedge fund positions. Penumbra Inc (NYSE:PEN) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for PEN is 57.8. 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 24% in 2021 through July 9th and surpassed the market again by 6.7 percentage points. Unfortunately PEN wasn’t nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); PEN investors were disappointed as the stock returned 2.2% since the end of March (through 7/9) 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.
