Hedge Funds Are Piling Into PubMatic, Inc. (PUBM)

Before we spend countless hours researching a company, we like to analyze what insiders, hedge funds and billionaire investors think of the stock first. This is a necessary first step in our investment process because our research has shown that the elite investors’ consensus returns have been exceptional. In the following paragraphs, we find out what the billionaire investors and hedge funds think of PubMatic, Inc. (NASDAQ:PUBM).

PubMatic, Inc. (NASDAQ:PUBM) investors should be aware of an increase in enthusiasm from smart money lately. PubMatic, Inc. (NASDAQ:PUBM) was in 10 hedge funds’ portfolios at the end of the second quarter of 2021. The all time high for this statistic is 10. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that PUBM isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).

So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 more than 79 percentage points since March 2017 (see the details here). We have been able to outperform the passive index funds by tracking the moves of corporate insiders and hedge funds, and we believe small investors can benefit a lot from reading hedge fund investor letters and 13F filings.

Richard Driehaus of Driehaus Capital

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. 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 let’s go over the recent hedge fund action encompassing PubMatic, Inc. (NASDAQ:PUBM).

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

At the end of June, a total of 10 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 100% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards PUBM over the last 24 quarters. With hedge funds’ positions undergoing their usual ebb and flow, there exists an “upper tier” of key hedge fund managers who were boosting their holdings significantly (or already accumulated large positions).

More specifically, Driehaus Capital was the largest shareholder of PubMatic, Inc. (NASDAQ:PUBM), with a stake worth $59.8 million reported as of the end of June. Trailing Driehaus Capital was D E Shaw, which amassed a stake valued at $8 million. Schonfeld Strategic Advisors, Millennium Management, and Marshall Wace LLP 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 Driehaus Capital allocated the biggest weight to PubMatic, Inc. (NASDAQ:PUBM), around 0.79% of its 13F portfolio. Schonfeld Strategic Advisors is also relatively very bullish on the stock, dishing out 0.07 percent of its 13F equity portfolio to PUBM.

With a general bullishness amongst the heavyweights, key hedge funds were leading the bulls’ herd. D E Shaw, managed by D. E. Shaw, assembled the largest position in PubMatic, Inc. (NASDAQ:PUBM). D E Shaw had $8 million invested in the company at the end of the quarter. Paul Marshall and Ian Wace’s Marshall Wace LLP also initiated a $2.9 million position during the quarter. The following funds were also among the new PUBM investors: Steve Cohen’s Point72 Asset Management, Brandon Haley’s Holocene Advisors, and Mark Wolfson and Jamie Alexander’s Jasper Ridge Partners.

Let’s also examine hedge fund activity in other stocks similar to PubMatic, Inc. (NASDAQ:PUBM). We will take a look at Lantheus Holdings Inc (NASDAQ:LNTH), Porch Group, Inc. (NASDAQ:PRCH), Piper Sandler Companies (NYSE:PIPR), Independence Realty Trust Inc (NYSE:IRT), Kenon Holdings Ltd. (NYSE:KEN), Sonic Automotive Inc (NYSE:SAH), and Kite Realty Group Trust (NYSE:KRG). This group of stocks’ market valuations resemble PUBM’s market valuation.

View table here if you experience formatting issues.

As you can see these stocks had an average of 12.7 hedge funds with bullish positions and the average amount invested in these stocks was $113 million. That figure was $87 million in PUBM’s case. Sonic Automotive Inc (NYSE:SAH) is the most popular stock in this table. On the other hand Kenon Holdings Ltd. (NYSE:KEN) is the least popular one with only 1 bullish hedge fund positions. PubMatic, Inc. (NASDAQ:PUBM) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for PUBM is 63.7. 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 25.7% in 2021 through September 27th and surpassed the market again by 6.2 percentage points. Unfortunately PUBM wasn’t nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); PUBM investors were disappointed as the stock returned -28.7% since the end of June (through 9/27) 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.