Hedge Funds Still Piling Into Peloton Interactive, Inc. (PTON)

Although the masses and most of the financial media blame hedge funds for their exorbitant fee structure and disappointing performance, these investors have proved to have great stock picking abilities over the years (that’s why their assets under management continue to swell). We believe hedge fund sentiment should serve as a crucial tool of an individual investor’s stock selection process, as it may offer great insights of how the brightest minds of the finance industry feel about specific stocks. After all, these people have access to smartest analysts and expensive data/information sources that individual investors can’t match. So should one consider investing in Peloton Interactive, Inc. (NASDAQ:PTON)? The smart money sentiment can provide an answer to this question.

Peloton Interactive, Inc. (NASDAQ:PTON) was in 64 hedge funds’ portfolios at the end of the first quarter of 2021. The all time high for this statistic was previously 63. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. PTON investors should pay attention to an increase in hedge fund interest of late. There were 63 hedge funds in our database with PTON positions at the end of the fourth quarter. Our calculations also showed that PTON isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 206.8% since March 2017 and outperformed the S&P 500 ETFs by more than 115 percentage points (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Brad Gerstner of Altimeter Capital

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best hydrogen fuel cell 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 let’s take a look at the latest hedge fund action surrounding Peloton Interactive, Inc. (NASDAQ:PTON).

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

At first quarter’s end, a total of 64 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 2% from the fourth quarter of 2020. On the other hand, there were a total of 36 hedge funds with a bullish position in PTON a year ago. 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, Tiger Global Management LLC was the largest shareholder of Peloton Interactive, Inc. (NASDAQ:PTON), with a stake worth $883.5 million reported as of the end of March. Trailing Tiger Global Management LLC was Whale Rock Capital Management, which amassed a stake valued at $387.4 million. Citadel Investment Group, Renaissance Technologies, and D1 Capital 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 Woodson Capital Management allocated the biggest weight to Peloton Interactive, Inc. (NASDAQ:PTON), around 15.67% of its 13F portfolio. Woodson Capital Management is also relatively very bullish on the stock, earmarking 12.95 percent of its 13F equity portfolio to PTON.

Consequently, specific money managers were breaking ground themselves. D1 Capital Partners, managed by Daniel Sundheim, assembled the biggest position in Peloton Interactive, Inc. (NASDAQ:PTON). D1 Capital Partners had $229.8 million invested in the company at the end of the quarter. Eashwar Krishnan’s Tybourne Capital Management also initiated a $134.2 million position during the quarter. The other funds with new positions in the stock are Brad Gerstner’s Altimeter Capital Management, David Fiszel’s Honeycomb Asset Management, and Robert Pohly’s Samlyn Capital.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Peloton Interactive, Inc. (NASDAQ:PTON) but similarly valued. We will take a look at Marvell Technology, Inc. (NASDAQ:MRVL), Orange SA (NYSE:ORAN), The Hershey Company (NYSE:HSY), Wayfair Inc (NYSE:W), Yum! Brands, Inc. (NYSE:YUM), Stanley Black & Decker, Inc. (NYSE:SWK), and D.R. Horton, Inc. (NYSE:DHI). This group of stocks’ market caps resemble PTON’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 32.7 hedge funds with bullish positions and the average amount invested in these stocks was $1413 million. That figure was $3963 million in PTON’s case. D.R. Horton, Inc. (NYSE:DHI) is the most popular stock in this table. On the other hand Orange SA (NYSE:ORAN) is the least popular one with only 2 bullish hedge fund positions. Compared to these stocks Peloton Interactive, Inc. (NASDAQ:PTON) is more popular among hedge funds. Our overall hedge fund sentiment score for PTON is 86. 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 17.2% in 2021 through June 11th and still beat the market by 3.3 percentage points. Unfortunately PTON wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on PTON were disappointed as the stock returned 0.6% since the end of the first quarter (through 6/11) 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 since 2019.

Disclosure: None. This article was originally published at Insider Monkey.