In this article we will check out the progression of hedge fund sentiment towards Penumbra Inc (NYSE:PEN) and determine whether it is a good investment right now. We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also employ numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.
Is Penumbra Inc (NYSE:PEN) undervalued? Prominent investors were taking a bullish view. The number of bullish hedge fund positions moved up by 3 recently. Penumbra Inc (NYSE:PEN) was in 33 hedge funds’ portfolios at the end of September. The all time high for this statistic was previously 30. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that PEN isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings).
David Harding of Winton Capital Management
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so 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. Now we’re going to take a look at the recent hedge fund action surrounding Penumbra Inc (NYSE:PEN).
Do Hedge Funds Think PEN Is A Good Stock To Buy Now?
At the end of the third quarter, a total of 33 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 10% from the second quarter of 2021. By comparison, 23 hedge funds held shares or bullish call options in PEN a year ago. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Citadel Investment Group was the largest shareholder of Penumbra Inc (NYSE:PEN), with a stake worth $120.4 million reported as of the end of September. Trailing Citadel Investment Group was Millennium Management, which amassed a stake valued at $111.1 million. Point72 Asset Management, Adage Capital Management, and Partner Fund 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 Engine No. 1 LLC allocated the biggest weight to Penumbra Inc (NYSE:PEN), around 4.02% of its 13F portfolio. Partner Fund Management is also relatively very bullish on the stock, earmarking 1.39 percent of its 13F equity portfolio to PEN.
With a general bullishness amongst the heavyweights, key money managers have been driving this bullishness. Pura Vida Investments, managed by Efrem Kamen, assembled the biggest position in Penumbra Inc (NYSE:PEN). Pura Vida Investments had $8 million invested in the company at the end of the quarter. William Harnisch’s Peconic Partners LLC also initiated a $2.2 million position during the quarter. The other funds with brand new PEN positions are David Harding’s Winton Capital Management, D. E. Shaw’s D E Shaw, and Peter Algert’s Algert Global.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Penumbra Inc (NYSE:PEN) but similarly valued. These stocks are A. O. Smith Corporation (NYSE:AOS), Manhattan Associates, Inc. (NASDAQ:MANH), McAfee Corp. (NASDAQ:MCFE), CyrusOne Inc (NASDAQ:CONE), Lithia Motors Inc (NYSE:LAD), Amdocs Limited (NYSE:DOX), and NiSource Inc. (NYSE:NI). This group of stocks’ market values are similar to PEN’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| AOS | 29 | 564878 | 3 |
| MANH | 25 | 475224 | -3 |
| MCFE | 31 | 330697 | 13 |
| CONE | 27 | 495607 | 1 |
| LAD | 64 | 2823225 | 1 |
| DOX | 24 | 824398 | -5 |
| NI | 24 | 435539 | -12 |
| Average | 32 | 849938 | -0.3 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 32 hedge funds with bullish positions and the average amount invested in these stocks was $850 million. That figure was $554 million in PEN’s case. Lithia Motors Inc (NYSE:LAD) is the most popular stock in this table. On the other hand Amdocs Limited (NYSE:DOX) is the least popular one with only 24 bullish hedge fund positions. Penumbra Inc (NYSE:PEN) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for PEN is 49.3. 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 positive signal but 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 28.6% in 2021 through November 30th and beat the market again by 5.6 percentage points. Unfortunately PEN wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on PEN were disappointed as the stock returned -7.8% since the end of September (through 11/30) 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 many of these stocks already outperformed the market since 2019.
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Disclosure: None. This article was originally published at Insider Monkey.
