Does Patterson Companies, Inc. (NASDAQ:PDCO) represent a good buying opportunity at the moment? Let’s quickly check the hedge fund interest towards the company. Hedge fund firms constantly search out bright intellectuals and highly-experienced employees and throw away millions of dollars on satellite photos and other research activities, so it is no wonder why they tend to generate millions in profits each year. It is also true that some hedge fund players fail inconceivably on some occasions, but net net their stock picks have been generating superior risk-adjusted returns on average over the years.
Patterson Companies, Inc. (NASDAQ:PDCO) has seen a decrease in hedge fund interest of late. Our calculations also showed that PDCO isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
To most stock holders, hedge funds are perceived as unimportant, outdated investment tools of years past. While there are greater than 8000 funds trading at the moment, Our experts hone in on the bigwigs of this group, around 750 funds. These hedge fund managers oversee the lion’s share of all hedge funds’ total capital, and by keeping an eye on their unrivaled equity investments, Insider Monkey has found numerous investment strategies that have historically outstripped the market. Insider Monkey’s flagship short hedge fund strategy outperformed the S&P 500 short ETFs by around 20 percentage points per year since its inception in May 2014. Our portfolio of short stocks lost 27.8% since February 2017 (through November 21st) even though the market was up more than 39% during the same period. We just shared a list of 7 short targets in our latest quarterly update .
Jeffrey Bronchick of Cove Street Capital
Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world’s most bearish hedge fund that’s more convinced than ever that a crash is coming, our long-short investment strategy doesn’t rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds‘ buy/sell signals. We’re going to take a look at the recent hedge fund action regarding Patterson Companies, Inc. (NASDAQ:PDCO).
How are hedge funds trading Patterson Companies, Inc. (NASDAQ:PDCO)?
Heading into the fourth quarter of 2019, a total of 22 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -4% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in PDCO over the last 17 quarters. With hedgies’ sentiment swirling, there exists a few noteworthy hedge fund managers who were boosting their stakes considerably (or already accumulated large positions).
More specifically, GAMCO Investors was the largest shareholder of Patterson Companies, Inc. (NASDAQ:PDCO), with a stake worth $31.9 million reported as of the end of September. Trailing GAMCO Investors was Select Equity Group, which amassed a stake valued at $30.7 million. Cove Street Capital, Citadel Investment Group, and Tavio Capital 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 Tavio Capital allocated the biggest weight to Patterson Companies, Inc. (NASDAQ:PDCO), around 6.14% of its 13F portfolio. Cove Street Capital is also relatively very bullish on the stock, earmarking 2.32 percent of its 13F equity portfolio to PDCO.
Seeing as Patterson Companies, Inc. (NASDAQ:PDCO) has witnessed bearish sentiment from hedge fund managers, it’s safe to say that there lies a certain “tier” of money managers that elected to cut their full holdings in the third quarter. Intriguingly, John D. Gillespie’s Prospector Partners sold off the largest investment of the “upper crust” of funds monitored by Insider Monkey, valued at close to $6.9 million in stock. Joel Greenblatt’s fund, Gotham Asset Management, also said goodbye to its stock, about $1 million worth. These moves are important to note, as aggregate hedge fund interest dropped by 1 funds in the third quarter.
Let’s also examine hedge fund activity in other stocks similar to Patterson Companies, Inc. (NASDAQ:PDCO). We will take a look at Axos Financial, Inc. (NYSE:AX), McGrath RentCorp (NASDAQ:MGRC), Zuora, Inc. (NYSE:ZUO), and Central Garden & Pet Co (NASDAQ:CENT). All of these stocks’ market caps are similar to PDCO’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| AX | 13 | 54561 | -1 |
| MGRC | 21 | 157899 | 3 |
| ZUO | 23 | 153629 | 4 |
| CENT | 23 | 154253 | 4 |
| Average | 20 | 130086 | 2.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 20 hedge funds with bullish positions and the average amount invested in these stocks was $130 million. That figure was $160 million in PDCO’s case. Zuora, Inc. (NYSE:ZUO) is the most popular stock in this table. On the other hand Axos Financial, Inc. (NYSE:AX) is the least popular one with only 13 bullish hedge fund positions. Patterson Companies, Inc. (NASDAQ:PDCO) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Hedge funds were also right about betting on PDCO as the stock returned 10.9% during the fourth quarter (through the end of November) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.
