Is Patterson Companies, Inc. (PDCO) A Good Stock To Buy?

Hedge Funds and other institutional investors have just completed filing their 13Fs with the Securities and Exchange Commission, revealing their equity portfolios as of the end of September. At Insider Monkey, we follow nearly 900 active hedge funds and notable investors and by analyzing their 13F filings, we can determine the stocks that they are collectively bullish on. One of their picks is Patterson Companies, Inc. (NASDAQ:PDCO), so let’s take a closer look at the sentiment that surrounds it in the current quarter.

Is PDCO a good stock to buy? Patterson Companies, Inc. (NASDAQ:PDCO) was in 21 hedge funds’ portfolios at the end of the third quarter of 2021. The all time high for this statistic is 29. PDCO investors should pay attention to a decrease in support from the world’s most elite money managers of late. There were 23 hedge funds in our database with PDCO positions at the end of the second quarter. Our calculations also showed that PDCO isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).

David Siegel of Two Sigma Advisors

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so 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. Now let’s take a look at the recent hedge fund action surrounding Patterson Companies, Inc. (NASDAQ:PDCO).

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

At Q3’s end, a total of 21 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -9% from the previous quarter. The graph below displays the number of hedge funds with bullish position in PDCO over the last 25 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, GAMCO Investors held the most valuable stake in Patterson Companies, Inc. (NASDAQ:PDCO), which was worth $30.2 million at the end of the third quarter. On the second spot was Citadel Investment Group which amassed $26.5 million worth of shares. Two Sigma Advisors, Tamarack Capital Management, and Royce & Associates 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 Tamarack Capital Management allocated the biggest weight to Patterson Companies, Inc. (NASDAQ:PDCO), around 4.71% of its 13F portfolio. Lodge Hill Capital is also relatively very bullish on the stock, setting aside 2.47 percent of its 13F equity portfolio to PDCO.

Seeing as Patterson Companies, Inc. (NASDAQ:PDCO) has experienced a decline in interest from the aggregate hedge fund industry, logic holds that there exists a select few hedgies who were dropping their positions entirely last quarter. Interestingly, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital sold off the largest investment of the 750 funds watched by Insider Monkey, valued at about $6.8 million in stock, and Joel Greenblatt’s Gotham Asset Management was right behind this move, as the fund dumped about $1 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest fell by 2 funds last quarter.

Let’s check out hedge fund activity in other stocks similar to Patterson Companies, Inc. (NASDAQ:PDCO). We will take a look at Verint Systems Inc. (NASDAQ:VRNT), Relay Therapeutics, Inc. (NASDAQ:RLAY), Urban Outfitters, Inc. (NASDAQ:URBN), John Wiley & Sons Inc (NYSE:JW), J&J Snack Foods Corp. (NASDAQ:JJSF), First Advantage Corporation (NASDAQ:FA), and Vishay Intertechnology (NYSE:VSH). This group of stocks’ market valuations resemble PDCO’s market valuation.

View table here if you experience formatting issues.

As you can see these stocks had an average of 20.9 hedge funds with bullish positions and the average amount invested in these stocks was $606 million. That figure was $151 million in PDCO’s case. Vishay Intertechnology (NYSE:VSH) is the most popular stock in this table. On the other hand John Wiley & Sons Inc (NYSE:JW) is the least popular one with only 14 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 overall hedge fund sentiment score for PDCO is 49.7. 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 positive signal but 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 29.6% in 2021 and beat the market again by 3.6 percentage points. Unfortunately PDCO wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on PDCO were disappointed as the stock returned -1.8% since the end of September (through 12/31) 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 many of these stocks already outperformed the market since 2019.

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

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