In this article you are going to find out whether hedge funds think Pentair plc (NYSE:PNR) is a good investment right now. We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It’s not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.
Is Pentair plc (NYSE:PNR) undervalued? Money managers were getting less optimistic. The number of bullish hedge fund bets decreased by 5 lately. Pentair plc (NYSE:PNR) was in 25 hedge funds’ portfolios at the end of June. The all time high for this statistic is 34. Our calculations also showed that PNR isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).
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Peter Rathjens of Arrowstreet Capital
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Do Hedge Funds Think PNR Is A Good Stock To Buy Now?
At the end of June, a total of 25 of the hedge funds tracked by Insider Monkey were long this stock, a change of -17% from the previous quarter. By comparison, 34 hedge funds held shares or bullish call options in PNR a year ago. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to Insider Monkey’s hedge fund database, Ian Simm’s Impax Asset Management has the most valuable position in Pentair plc (NYSE:PNR), worth close to $645.7 million, accounting for 2.8% of its total 13F portfolio. On Impax Asset Management’s heels is Arrowstreet Capital, led by Peter Rathjens, Bruce Clarke and John Campbell, holding a $22.8 million position; less than 0.1%% of its 13F portfolio is allocated to the stock. Some other professional money managers that hold long positions comprise Cliff Asness’s AQR Capital Management, John D. Gillespie’s Prospector Partners and Phill Gross and Robert Atchinson’s Adage Capital Management. In terms of the portfolio weights assigned to each position Impax Asset Management allocated the biggest weight to Pentair plc (NYSE:PNR), around 2.85% of its 13F portfolio. Prospector Partners is also relatively very bullish on the stock, setting aside 1.51 percent of its 13F equity portfolio to PNR.
Seeing as Pentair plc (NYSE:PNR) has experienced bearish sentiment from the entirety of the hedge funds we track, it’s easy to see that there lies a certain “tier” of funds that decided to sell off their full holdings in the second quarter. It’s worth mentioning that Paul Marshall and Ian Wace’s Marshall Wace LLP dropped the largest investment of the “upper crust” of funds watched by Insider Monkey, comprising an estimated $60.7 million in stock, and Paul Tudor Jones’s Tudor Investment Corp was right behind this move, as the fund said goodbye to about $2.8 million worth. These moves are important to note, as total hedge fund interest dropped by 5 funds in the second quarter.
Let’s now take a look at hedge fund activity in other stocks similar to Pentair plc (NYSE:PNR). We will take a look at Formula One Group (NASDAQ:FWONK), F5 Networks, Inc. (NASDAQ:FFIV), Coca-Cola FEMSA, S.A.B. de C.V. (NYSE:KOF), Santander Consumer USA Holdings Inc (NYSE:SC), Levi Strauss & Co. (NYSE:LEVI), Floor & Decor Holdings, Inc. (NYSE:FND), and Watsco Inc (NYSE:WSO). All of these stocks’ market caps resemble PNR’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| FWONK | 41 | 1724231 | 4 |
| FFIV | 30 | 704710 | 4 |
| KOF | 9 | 461993 | -1 |
| SC | 26 | 325714 | 3 |
| LEVI | 30 | 414270 | 11 |
| FND | 28 | 1164208 | -10 |
| WSO | 26 | 306144 | 4 |
| Average | 27.1 | 728753 | 2.1 |
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 $729 million. That figure was $749 million in PNR’s case. Formula One Group (NASDAQ:FWONK) is the most popular stock in this table. On the other hand Coca-Cola FEMSA, S.A.B. de C.V. (NYSE:KOF) is the least popular one with only 9 bullish hedge fund positions. Pentair plc (NYSE:PNR) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for PNR is 47.1. 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. A small number of hedge funds were also right about betting on PNR as the stock returned 12.9% since the end of the second quarter (through 10/22) and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.
