The financial regulations require hedge funds and wealthy investors that exceeded the $100 million equity holdings threshold to file a report that shows their positions at the end of every quarter. Even though it isn’t the intention, these filings to a certain extent level the playing field for ordinary investors. The latest round of 13F filings disclosed the funds’ positions on March 31st, about a week after the S&P 500 Index bottomed. We at Insider Monkey have made an extensive database of more than 821 of those established hedge funds and famous value investors’ filings. In this article, we analyze how these elite funds and prominent investors traded Purple Innovation, Inc. (NASDAQ:PRPL) based on those filings.
Purple Innovation, Inc. (NASDAQ:PRPL) has seen an increase in activity from the world’s largest hedge funds lately. Our calculations also showed that PRPL isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).
Video: Watch our video about the top 5 most popular hedge fund stocks.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 58 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Cliff Asness of AQR Capital Management
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, blockchain technology’s influence will go beyond online payments. So, we are checking out this futurist’s moonshot opportunities in tech stocks. We interview hedge fund managers and ask them about their best ideas. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. For example we are checking out stocks recommended/scorned by legendary Bill Miller. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind let’s go over the new hedge fund action encompassing Purple Innovation, Inc. (NASDAQ:PRPL).
Hedge fund activity in Purple Innovation, Inc. (NASDAQ:PRPL)
Heading into the second quarter of 2020, a total of 14 of the hedge funds tracked by Insider Monkey were long this stock, a change of 8% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in PRPL over the last 18 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Coliseum Capital was the largest shareholder of Purple Innovation, Inc. (NASDAQ:PRPL), with a stake worth $46.7 million reported as of the end of September. Trailing Coliseum Capital was Woodson Capital Management, which amassed a stake valued at $13.3 million. Kingdon Capital, Rip Road Capital, and Manatuck Hill Partners 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 Coliseum Capital allocated the biggest weight to Purple Innovation, Inc. (NASDAQ:PRPL), around 12.66% of its 13F portfolio. Woodson Capital Management is also relatively very bullish on the stock, designating 1.88 percent of its 13F equity portfolio to PRPL.
With a general bullishness amongst the heavyweights, some big names have jumped into Purple Innovation, Inc. (NASDAQ:PRPL) headfirst. AQR Capital Management, managed by Cliff Asness, created the most valuable position in Purple Innovation, Inc. (NASDAQ:PRPL). AQR Capital Management had $0.3 million invested in the company at the end of the quarter. Greg Eisner’s Engineers Gate Manager also initiated a $0.1 million position during the quarter. The only other fund with a brand new PRPL position is Ken Griffin’s Citadel Investment Group.
Let’s also examine hedge fund activity in other stocks similar to Purple Innovation, Inc. (NASDAQ:PRPL). These stocks are Tivity Health, Inc. (NASDAQ:TVTY), Intelligent Systems Corporation (NYSE:INS), Flexion Therapeutics Inc (NASDAQ:FLXN), and Franklin Financial Network Inc (NYSE:FSB). This group of stocks’ market caps match PRPL’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| TVTY | 13 | 134787 | -5 |
| INS | 9 | 62514 | 0 |
| FLXN | 14 | 55390 | -1 |
| FSB | 4 | 7832 | 0 |
| Average | 10 | 65131 | -1.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 10 hedge funds with bullish positions and the average amount invested in these stocks was $65 million. That figure was $71 million in PRPL’s case. Flexion Therapeutics Inc (NASDAQ:FLXN) is the most popular stock in this table. On the other hand Franklin Financial Network Inc (NYSE:FSB) is the least popular one with only 4 bullish hedge fund positions. Purple Innovation, Inc. (NASDAQ:PRPL) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 13.3% in 2020 through June 25th but still beat the market by 16.8 percentage points. Hedge funds were also right about betting on PRPL as the stock returned 221.3% in Q2 (through June 25th) 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.
